TOTAL loans for the credit-only microfinance sector increased by 26,4 percent to $316,3 million in the quarter ended June 30, 2019 with the bulk of the loans supporting the agriculture sector.
In a performance report for the period under review, the Zimbabwe Association of Microfinance Institutions (Zamfi) attributed the increase in loan book to improved lending by various sectors of the economy.
“The credit-only microfinance sector total loan book significantly increased from $250,1 million as at March 31, 2019 to $316,3 million as at June 30, 2019 constituting an increase by $66,2 million.
“The previous quarterly increase (January to March period) was $18,5 million, indicating that the sector is increasing its lending,” it said.
In the microfinance sector performance report, Zamfi indicated that the agriculture sector received 35 percent of the micro-finance institutions total loan book followed by the productive sector, which received 29 percent while 24 percent went towards consumptive purposes.
“As at June 30, 2019, microfinance loan portfolio was made up of 35 percent for agriculture sector, a significant increase from 13 percent reported in March 2019.
“This is a significant shift of the microfinance business away from the traditional consumption loans, generally regarded as less productive and inflationary,” said the microfinance association.
“The support of the productive sectors of the economy by the MFIs resonates very well with current Government efforts to increase the production of goods and services.”
Zamfi commended microfinance institutions for lending the agriculture sector at a time when Government has pinned Gross Domestic Product growth on revival of the agriculture industry in addition to mining and tourism. It also noted that the level and amount of the loan portfolio of the micro-finance industry is regarded as the main source of revenue and risk hence tracking of its performance is important.
As at June 30, 2019, the loan portfolio for the credit-only microfinance sector amounted to $315,84 million while the total for non- performing loans (value of loans in arrears by more than 30 days) was $46,05 million.
This constitutes 14,58 percent the total loan portfolio and as such represents a deterioration of the quality of the loan portfolio compared with 11,01 percent reported in March 2019.
On portfolio quality, Zamfi said the main reason for high delinquency level during the period was the adverse external macroeconomic environment characterised by high inflation and sudden deterioration in income levels of the majority of clients for the MFIs.
“Major policy changes such as introduction of local currency (Zimbabwe dollar), interbank market for foreign currency trading and slow adjustment of workers’ salaries by many employers has left many clients highly exposed to over indebtedness.
“The only alternative solution is a significant increase in wages and salaries by both the public and private sector.
“This will go a long way to restore living standards, create customer demand and give clients the capacity to repay their outstanding debts,” it said.
On profitability and sustainability, the microfinance sector reported total income for the first six months of the year amounting to $53,7 million and a portfolio to yield ratio of 19,9 percent, up from 14 percent reported in March 2019.
Net profit increased from $4,5 million in March 2019 to $6,9 million in June 2019 leading to return to equity of 10,4 percent for the shareholders.
“Overally, the level of sustainability as reflected by the operational self-sufficiency ratio of 114,7 percent had remained stable, indicating that the sector is able to cover its expenses from operating revenues,” said Zamfi.–herald.co.zw