ZIMBABWE’S microfinance institutions are making frantic efforts to boost their balance sheets after it emerged that 34 of the credit-only entities failed to meet the US$5 million minimum capital threshold as at June this year.
BERNARD MPOFU
A floundering economy and wage pressures resulting from high inflation are forcing many employed Zimbabweans to turn to the lenders. But the current high interest rate regime has in recent times slowed down borrowings. The authorities hiked interest rates to 200% to discourage borrowing for parallel market foreign exchange transactions.
According to the latest Reserve Bank of Zimbabwe Microfinance Quarterly Industry Report for the period ending 30 June, the microfinance industry registered significant improvement in total loan portfolio, total assets, aggregate equity and net profit as microfinance business operations returned to normalcy post the Covid-19 pandemic.
“All deposit-taking microfinance institutions (DTMFIs) were not compliant with the new minimum capital requirements of ZW$ equivalent to US$5 million effective 31 December 2022. Measures are underway to bolster the institutions’ capital levels,” the report reads.
“As at 30 June 2022, 34 credit-only microfinance institutions were not compliant with the minimum capital requirements of ZW$ equivalent to US$25 000, effective 31 December 2021. Exchange rate developments had significantly impacted on the balance sheet of microfinance institutions. Seven (7) operating deposit-taking microfinance institutions were not compliant with the minimum capital requirements of ZW$ equivalent to US$5 million. The DTMFs were given up to 31 December 2022 to comply with the new capital requirements.”
The sector’s aggregate capitalisation levels, the report shows, recorded an increase of 118.25% up from ZW$6.63 billion as at 31 March 2022 to ZW$14.470 billion as at 30 June 2022. The increase in equity was largely attributed to injection of additional capital by shareholders of some microfinance institutions and capitalisation of retained earnings in a bid to comply with the minimum capital requirements.
Official figures show that as at 30 June 2022, there were 199 registered microfinance institutions comprising 191 credit-only microfinance institutions and 8 deposit-taking microfinance institutions.
The microfinance sector recorded 8.22% growth in branch network, from 900 as at 31 March 2022 to 974 as at 30 June 2022.
“The sector’s aggregate total equity registered a 118.25% increase over the quarter from ZW$6.63 billion as at 31 March 2022, to ZW$14.470 billion as at 30 June 2022. The increase in equity was largely attributed to injection of additional capital by shareholders of some microfinance institutions and capitalisation of retained earnings in a bid to comply with the minimum capital requirements,” the report reads.
“The aggregate total equity for the subsector increased over the review period from ZW$3.99 billion as at 31 March 2022, to ZW$7.48 billion as at 30 June 2022 representing an 87.46% increase in equity in the credit-only microfinance institutions subsector. The growth was attributed to injection of additional capital and capitalisation of retained earnings.”
