Microfinance sector ups lending 9 percent in Q1, 2019

12 Jun, 2019 - 11:06 0 Views
Microfinance sector ups lending 9 percent in Q1, 2019

eBusiness Weekly

HARARE – The Zimbabwean micro-finance sector  increased lending to various sectors of the economy by 9 percent to RTGS$225.8 million in the first quarter of the year compared to the same  period last year, a recent industry report shows.

The Zimbabwe Association of Microfinance Institutions (Zamfi) said on  Tuesday demand for loans remained high but was constrained by shortage  of capital on the market.

Ability to manage costs despite high inflation levels saw the sector  record an aggregate profit of RTGS$4.5 million during the three-month  period.

Return on equity and assets improved significantly to 24 percent and 8  percent respectively compared with 16 percent and 5 percent as at 31  December 2018.

“The money and capital markets in Zimbabwe is currently starved of  capital hence many MFIs, especially small MFIs are finding it hard and  difficult to keep pace with the need to increase outreach to significant  levels,” Zamfi said.

With commercial banks seen as too restrictive and not pro-poor, the  majority of people turn to MFIs for financial support.

The support however comes at high monthly interest rates and very  strict compliance procedures to address defaults.

During the quarter, Zamfi said five institutions, which had a total  loan book of RTGS$172 million, continued to dominate the sector.

It said rising inflation presented a challenge for the sector as there  was no corresponding increase in loan books.

“To protect their business against rising inflation, the MFIs may  consider offering a diversified pool of loans products both in local  RTGS dollar as well USD dollar,” it said.

Zamfi said a few MFIs were already offering credit in foreign currency.

It noted that the bulk of its members were serving urban communities as  opposed to those in rural areas.

“The large component of loans required by the rural folks is  agribusiness loans, which have tremendous impact in uplifting them from  poverty and low income  levels,” Zamfi said, pushing members to improve the rural outreach.

The association encouraged members to keep financing the agriculture  sector which “is perceived as a catalyst for rapid economic growth that  has the potential to stimulate exports, alleviate poverty, create jobs  and improve people’s general living standards.” – New Ziana


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