MFIs capital base spikes to $1,37bn
THE capital base of credit-only microfinance institutions reached a record high of $1,37 billion as at June 30, 2021 on the back of improved levels of profitability.
In a performance report of the sector for the period under review, the Zimbabwe Association of Microfinance Institutions (Zamfi) said the credit-only microfinance institutions total asset amounted to $3,337 billion during the quarter under review from $2,136 billion as at 31 March 2021.
“The capital base of credit only microfinance institutions (MFIs) increased significantly during the quarter from $946,5 million as at 31 March 2021 to $1,37 billion as at 30 June 2021, reaching for the first time a ‘billion mark’ record,” it said.
“The increase was largely due to improved levels of profitability for the sector against reduced risks related to credit risk and business environment.”
Zamfi said Government policies such as a predictable monetary policy, smooth exchange rate management, tight inflation targeting and balanced national budget were now the bedrock of the building block towards rebuilding a sustainable microfinance sector.
“Nevertheless, there is still need for massive investments inflows into the sector for it to play a meaningful role in financial inclusion as well as poverty alleviation for the marginalised communities across the country, especially in rural areas,” said the association.
In the period under review, the credit only MFI total asset amounted to $3,337 billion, up from $2,136 billion reported as at March 31, 2021. Zamfi predicts that the industry is set to significantly improve in the remaining quarter of 2021 underpinned by the previous quarterly performance this year.
This is in view of the relaxed lockdown rules that have since contributed to increased business activity by both individuals and corporates. The total loan book increased from $1,682 billion to $2,254 billion as at 30 June 2021, with the bulk of lending being consumption loans of 48 percent of the total loan size.
“This represents a slight improvement from the 47 percent reported in March 2021. The portfolio at risk ratio, which was reported to be 9,35 percent as at 31 December 2020 and deteriorated to 14,36 percent as at March 2021, has since registered a significant improvement to 6,67 percent as at June 2021,” said Zamfi.
There was also improved risk coverage ratio, which increased from 35,84 percent as at March 2021, to 66,63 percent, a clear confirmation that microfinance institutions are now setting aside a large pool of loan loss reserves to act as a cushion against unexpected loan losses.
In total, the loan loss reserves amounted to $101 million against non-performing loans of $152 million for the credit-only MFI sector. The credit-only MFI sector recorded total financial income of $1,332 billion against operating costs of $732,7 million, translating into a net profit of $599,7 million for the six-month trading period.
During the period, return on asset and equity represented 18 percent and 43,6 percent respectively, an expression of the good return for investors from the lucrative and captive microfinance sector. — The Chronicle
