Microfinance sector recovers from Covid-19 effects
The Reserve Bank of Zimbabwe (RBZ) has revealed that economic recovery from the effects of Covid-19 pandemic has seen the microfinance industry register improvement across key performance indicators including loans to women.
With most Zimbabweans as well as small to medium enterprises operating in the informal sector, microfinance institutions play a key role in providing financial services such as loans and advances.
Individuals, as well as SMEs, also lack assets that are required as security for loans, but microfinance institutions are flexible enough to provide loans even without fixed assets that can be used as collateral.
The country has 176 registered microfinance institutions comprising 168 credit-only microfinance institutions and eight deposit-taking microfinance institutions (DTMFIs), down from 209 same time last year.
The number of licensed credit-only microfinance institutions declined to 176 following cessation of operations by some institutions due to the negative effects of the Covid-19 pandemic.
However, despite the decline in microfinance institutions, the sector managed to register growth across key performance indicators for the period under review.
According to a central bank report for the nine months to September 30, 2021, the sector registered a 25,29 percent increase in the number of active clients, from 268,136 to 335,946 as of 30 September 2021.
In addition, the industry recorded an increase in the number of women accessing loans during the quarter, from 117,275 to 149, 026.According to the RBZ, which regulates and supervises microfinance institutions, the value of loans to female borrowers also increased by 48,24 percent during the quarter under review to $2,47 billion, up from
$1,66 billion.
Women are seen as marginalised members of society in terms of financial inclusion but through microfinance institutions, their participation in accessing financial services has been growing over the years.
Meanwhile, the microfinance industry recorded improved cumulative retained earnings of $1,22 billion for nine months ended September 30, 2021, representing a 127,682 percent increase from $536,50 million during the comparative period in 2020.
The industry’s cost-containment measures, in particular adoption of digital financial services, and increased operating income underpinned by loan portfolio growth, contributed to growth in aggregate retained earnings, reads part of the RBZ’s report.
The return on assets (ROA) ratio for the industry increased to 28,36 percent during the nine months ended September 30, 2021, from 22.06 percent for the comparable period in 2020, while the return on equity (ROE) ratio significantly improved from 17,17 percent to 46,46 percent over the same period.
“The improvement in profitability signifies business recovery from the effects of Covid19 pandemic following relaxation of Covid-19 induced national lockdown and movement restrictions,” said the central bank.
The increase in profits comes as the microfinance sector recorded a significant increase in total loans from $3.97 billion as of June 30, 2021, to $5,87 billion as of September 30, 2021, representing a growth of 47,86 percent.
“The growth was attributed to increased demand by micro-enterprises seeking to resuscitate business as the macroeconomic environment improved following relaxation of Covid-19 induced national restrictions, and low-income households, seeking to supplement their disposable incomes as they recovered from the effects of Covid-19
pandemic.
“The average loan size per borrower increased by 35.95 percent, from $12,847.88 as of June 30, 2021 to $17,466.55 as of September 30, 2021 reflective of the operating environment.”-eBusiness Weekly
