Microfinanciers approve more loans based on movable collateral

The Collateral Registry is an RBZ-owned, publicly available database of interests in or ownership of movable assets tendered to secure loans.
ZIMBABWE Association of Microfinance Institutions (Zamfi) executive director Godfrey Chitambo says the Reserve Bank of Zimbabwe (RBZ)’s Collateral Registry is making microfinanciers lend more to clients who use movable assets as security for loans.

The Collateral Registry is an RBZ-owned, publicly available database of interests in or ownership of movable assets tendered to secure loans.

The registry facilitates secured creditors or lenders to register security interest in movable assets such as livestock, household goods, crops, business stock and accounts receivable while notifying the public of the existence of such security interest.

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“As an industry, we provide loan facilities to financially excluded Zimbabweans and in this case, we have come up with requirements that assist to support people seeking to access loans with flexible terms,” Chitambo said in an interview with NewsDay Business.

“Collateral requirements, for example, we acknowledge the efforts of the Reserve Bank of Zimbabwe which set up the Collateral Registry, which has seen more microfinance institutions being comfortable to lend on the basis of movable security as they are now able to register their interests with the Collateral Registry.”

He said the basis for determining loan amounts and limits was the ability and capacity of a customer to repay the loan advanced.

“Zamfi encourages potential borrowers to engage various MFIs [microfinance institutions] offering different specific services depending on the market segments they serve,” Chitambo added.

“The level of diversification among players in the industry ensures that borrowers are catered for at various stages of their business.”

As of September 30, the microfinance sector had total loans of ZiG1,8 billion (US$72,33 million) and US$84,9 million.

By that period, it generated a total income of ZiG1,04 billion (US$41,79 million) and this growth was primarily driven by interest income from lending.

Subsequently, the sector achieved a profit of ZiG385,8 million (US$15,5 million), up from ZiG130,9 million (US$5,26 million) reported during the first six-month period.

“The industry has witnessed growth over the years and we have seen the entry of new players into the microfinance industry,” Chitambo said.

“Growth can be achieved through upgrading from a credit-only MFI to a deposit-taking MFI, or alternatively, through mergers and acquisitions. We have seen players grow.”

He said as of September, the sector’s portfolio at risk (PaR) greater than 30 days (PaR>30) was 8,3%, which was higher than the international benchmark of 5%.

PaR is a key financial metric used to measure the health of a loan portfolio, particularly in microfinance and banking.

“We continue with efforts to ensure that we improve collection methods to ensure this ratio improves for key players. Zamfi has undertaken training for its members on good credit (management) practices that enhance portfolio quality,” Chitambo said.-newsda