THE number of clients served by micro-finance institutions (MFIs) in the country decreased by 0,56 percent last year to 197 343 largely due to the prevailing inflationary pressures and unstable exchange rate.
In a microfinance sector performance report for the year ended December 31, 2019, the Zimbabwe Association of Microfinance Institutions (Zamfi) attributed the sluggish growth of the microfinance sector to the prevailing macro-economic climate.
“The breadth of outreach, which refers to the number of people served by the credit only microfinance institutions indicate a total of 197 343 clients as at 31 December 2019 compared to 198 456 the previous year, an indication of a very slow growth of the sector,” it said.
“The downside risk weighing heavily against a significant increase in people being served by micro-finance sector are high inflation and unstable exchange rate.”
In a written response to questions by Business Chronicle yesterday, Zamfi regional coordinator for Bulawayo Mr George Nhepera, urged MFIs to expand their clientele base by going rural and offering lending development finance.
“The microfinance institutions are encouraged to go beyond the urban clients and include clients in rural areas primarily in agri-business projects and small-scale mining.
“These sectors are currently on the rise in terms of high economic activity and good prospects of profitability,” he said.
According to a global report by Microfinance Barometer in 2018, it is estimated that nearly 140 million borrowers worldwide are receiving funding from microfinance institutions.
Zamfi noted that the prevailing policy efforts by the monetary authorities in the country to reduce volatility and wild swings in the exchange rate and inflation are at best expected to bear fruit in the next 12 to 18 months.
In the 4th quarter of the year under review, the credit-only microfinance sector’s total loan book indicates a sluggish growth trend during the previous quarters of 2019, since introduction of the interbank foreign exchange market.
“As at December 31, 2019, the total loan book amounted to $379,3 million, a marginal increase by $27,1 million, compared with $35,9 million and $66,2million for the respective quarters of March –June and June – September 2019,” said Zamfi.
The quarterly loan outreach for MFIs in 2019 amounted to ZWL$225,8 million by end of March, ZWL$316,3 million by June, ZWL$352,2 million by September and $379,3 million by December.
Zamfi said the trend was worrying despite the significant reduction in overnight rate from 70 percent to 35 percent by the RBZ, which was meant to stimulate lending by financial institutions including MFIs.
“However, on the positive side, it has helped to stabilise credit risk, which tends to increase in an environment of high overnight lending rates.
“Going forward, it is projected that the loan book of many MFIs is set to increase in the light of new minimum capital levels announced by the monetary authorities of US$25 000 for credit-only MFIs effective December 2020.-State media
