adminOliver Kazunga, Senior Business Reporter
THE credit-only microfinance sector total assets increased by 13,1 percent to $233,5 million for the quarter ended December 31,2018.
The Zimbabwe Association of Microfinance Institutions (Zamfi) revealed that in the previous quarter ended September 30, 2018, credit-only microfinance institutions had a combined assets value of $206,3 million.
“The asset growth was driven mainly by total loans, which constituted 90 percent of the total assets. Investments in fixed assets have remained low, representing five percent of the total assets.
“The sector in terms of credit outreach continues to be dominated by top five credit-only microfinance institutions with an aggregate loan portfolio of $157,3 million against total loans for the sector amounting to $207,3 million as at 30 December 2018,” said Zamfi in the report.
It said the credit-only microfinance sector remained generally profitable but under threat of unsustainability due to deterioration in macro-economic conditions during the last quarter of 2018.
“A number of domestic developments such as two percent money transfer tax; unstable market value of the local currency and social and political tensions have negatively affected the enabling environment of microfinance.
“Due to these negative developments, the sector reported reduced levels of profitability as demonstrated by an aggregate net profit of $11,13 million as at December 30, 2018 compared to $20,5 million in December 2017.”
The negative effect is more pronounced with respect to the fall of operational self-sufficiency ratio to 118,5 percent as at December 31, 2018 compared to 151,6 percent for December 2017 and 124 percent for September 2018.
Going forward the sector may need to come up with revenue enhancement initiatives and cost containment measures such as adoption of technology, streamlined operational process and agency banking for remote rural areas.
On MFIs loan portfolio quality, Zamfi said:
“The institutional cost of delivering loan services by MFIs as measured by the operating expenses ratio (efficiency ratio) has significantly gone up during the last quarter of Sept-December 2018.
“The ratio increased from 16 percent to 24 percent, indicating that it now costs $24 to disburse a $100 loan. In addition, the cost of maintaining one active borrower is now $250, up from $147 reported in September 2018.
“Reflecting the shift towards disbursement of loans of a larger value, the average outstanding loan has increased to $1 032 compared with $782.
“The deterioration in all the above indicators of efficiency and productivity is highly correlated to the two percent money transfer tax and significant increase in inflation recorded since September 2018.
“Inflation has increased from single-digits of less than 10 percent in September 2018, to the latest figure of 52 percent as at end of February 2019. The recent introduction of a new currency, RTGS$ by the Central Bank trading at USD: 2,5 RTGS$, well before the USD: 3,5 RTGS$ in the alternative foreign exchange markets, is not expected to be the solution to the current hyperinflation period, at least in the short to medium term period,” said Zamfi.
– @okazunga
Online Reporter