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Martin Kadzere and Enacy Mapakame
ZB Financial Holdings is looking at setting up a micro finance unit to tap into the growing demand for small loans and to promote financial inclusion, CEO Mr Ron Mutandagayi said. Initially, the division would be a lending micro-finance. But depending on the performance and the regulatory regime, it may end up being a deposit taking institution.“We believe time has come to benefit from opportunities that arise there,” said Mr Mutandagayi while presenting the company’s financial results for six months to June yesterday.
“It is an area we have been observing; we are seeing that money is being made in small loans and we would like to incorporate an entity that plays into that field.
“Little transactions repeated many times end up being substantial and that’s the theory we are working on. So if you give $100 and $200 loans circulated very quickly over a period of a month or a year you will find out you will actually make a lot of money.”
He said the company was still conducting a proper analysis “before we jump into it”.
A number of financial institutions are recognising the shift that has happened in Zimbabwe’s economy where the informal sector now accounts for a significant part of the economy. As such, micro finance provides a good platform to provide funding for the sector.
Mr Mutandagayi said ZB was also looking to tap into the entire region and would use Mozambique as a spring board of “pursuing profitable opportunities” in other markets.
ZB has already obtained approvals to establish a reinsurance business in Mozambique.
On NPLs, ZB is setting up a special purpose vehicle to hive off non-performing loans of about $14 million from its balance sheet.
“There are non-performing loans that ZAMCO is happy with so we are creating a separate vehicle to take over the loans off balance sheet. It will operate as an autonomous entity outside the bank with its own board. There are some assets that are still fundamental going forward although they may have failed to perform well, so perhaps we will invite investors to participate in the SPV. We will find foreign investors; people who come and say if I give you $100, you may be able to get assets worth $200; buying those bad assets is the concept we are pursuing.”
Bad debt recoveries during the period had a profound impact on the results, with $2,7 million having been credited to the income statement. Interest margins remained tight, with net interest income receding by 1,9 percent due to a 6 percent growth in earning assets. Net insurance premiums declined by 15 percent due to an 18 percent reduction in gross insurance premium and in line with a market-wide shrinkage in insurance business.
A 6,9 percent saving on operating expenditure was noted during half year, in comparison to the same period in 2015. ZB said cost control will remain a focal point in light of constrained revenues. About 95 percent of the profit for the period, amounting to $5,6 million, is attributable to the shareholders of the parent company while the balance is attributable to non-controlling shareholders in the group’s subsidiaries.
Total assets as at 30 June 2016 declined by 7 percent to $396 million from $424,1 million due to a 6 percent drop in deposits as general liquidity conditions remained unfavourable.
Mortgages and other advances dropped by 6 percent to $93,6 million on the back of accelerated recoveries while a cautious approach was maintained on the creation of new credit facilities.
Assets continued to be skewed towards money market instruments, which constituted 30 percent of the total assets. This guaranteed liquidity availability in the business while achieving a lower charge on capital resources.
As a result, liquidity ratio of 63 percent and capital adequacy ratios above 25 percent for the banking operations were maintained.
Online Reporter