The ManicaPost
Rumbidzayi Zinyuke Senior Business Reporter
Micro finance institutions have been urged to consider diversifying their products to protect themselves from the prevailing difficult macro-economic environment.
Zimbabwe Association of Microfinance Institutions in its latest report says the country is currently starved of capital hence many MFIs, especially the small ones are finding it hard and difficult to keep pace with the need to increase outreach to significant levels.
According to the report, the credit only microfinance sector’s total loans increased by $18,5 million, from $207, 3 million as at December 31, 2018 to $225,8 million as at March 31, 2019.
“At the prevailing interbank rate of USD: RTGS$5,5 as at 6 June 2019, this translates to USD$41,0 million. This compares unfavourably to the microfinance loan book of USD$75,1 million reported in December 2015, before the country adopted the surrogate bond note currency pegged as 1:1 with USD dollar in 2016. The pressure to grow is now inevitable as microfinance is traditionally a highgrowth industry. Exponential growth in outreach is a key factor in achieving sustainability, viability and significant market share by MFIs,” said Zamfi.
The report urged FIs to consider offering loan products in both local RTGS and US dollar to protect their businesses against the rising inflation levels.
“Some few MFIs in the market with access to US dollars are already offering such products and as such are bound to reap the benefits of sustained credit operations in spite of operating in a fragile and uncertain economic environment. Going forward improvements in both efficiency and productivity shall largely remain within the reach of MFIs through adoption of technology.
“Notable forms of technology such as smart cards, Point-of-Sale (POS) devices, mobile banking and access to internet have the capacity to speed up services, increase outreach, reduce operation cost & risk and ultimately broaden access to financial services by both clients in urban and rural areas,” the report said.
The sector registered an aggregate net profit of $4,5 million for the three months’ period, compared with $2,7 million recorded the previous year during the same period.
The report noted that the creation of an active interbank market for foreign currencies, among other policy measures, was in the short to medium term period expected to be a catalyst for the profitability of the sector.
It also noted that MFIs with sound risk management and governance systems may soon be able to tap into available nostro funds for on-lending in foreign currency to SME clients, largely involved in import and export business.
Zamfi said since most loans in the sector are unsecured, their delinquency levels unless attended to swiftly and decisively may have a contagious effect of affecting both the profitability and capital levels of some MFIs.
“In the short to medium term solutions lie in controlling the level of credit risk through adoption of preventive credit risk mitigation measures such as redesigning of loan products that meet client needs, tightening client screening systems as well enhancing the role and technical capacity of loan officers and committees engaged in approving credits before disbursements,” Zamfi added.
