TOTAL loans for the credit-only microfinance sector increased by 24% to ZW$469,2 million in the quarter ended March 31, 2020, primarily driven by borrowing to meet expenditure obligations and working capital to finance income generating projects.
In a performance report for the period under review, the Zimbabwe Association of Microfinance Institutions (Zamfi) said the increase in the loan book was largely driven by borrowing to meet expenditure obligations such as school fees, household food requirements and working capital to finance income generating projects.
Last year the loan book stood at ZW$379,3 million.In spite of the sectors’ loan portfolio remaining stable as indicated by the portfolio at risk of 13,93% against 13,38 % recorded in December last year, Zamfi said it should be noted that the post lockdown period that commenced on March 30 2020 put “tremendous and undue pressure on microfinance credit systems of disbursements and repayments, especially on micro-finance institutions (MFIs) that had lagged behind in the implementation of information and communication technologies systems”.
“The impact however was generally of minimal disruption to MFIs which prior to lockdown had migrated successfully to cloud-based systems, equipped already with latest digital payment and communication systems that rely less on personal human interaction,” Zamfi said.
Due to factors primarily linked to economic recessions such as inflation and volatile exchange rate which existed prior to the Covid-19 pandemic outbreak, the first quarter results were negatively affected, resulting in the reporting of lower than expected low level profit for the three months period.
The microfinance credit only total financial income amounted to ZW$85,4 million against operating revenue of ZW$83,4million which then translated to a net profit of ZW$2 million and operational self-sufficiency ratio (OSS) of 102%, which is far much lower than the international benchmark of 120%.
The return of assets and equity were 0,3% and 1,5%, respectively.
The same results for last year’s quarterly period of March 2019, were net profit of ZW$4,5 million, OSS at 117%, return on asset at 1,8% and return on equity at 6,2%.
“These results, in real terms could be far worse if hyperinflation accounting is applied, which takes into account both inflation and foreign exchange losses on assets and liabilities driven by devaluation of the Zimbabwean dollar against the United States dollar,” Zamfi said.
“The upcoming figures for the six months period under the negative effects then of coronavirus and lockdown rules paints to a gloomy outlook on profitability and sustainability of the sector which can only be arrested if individual MFIs take bold and honest decision to restrategise, recapitalise and remodel their business lending activities in line with the new “normal’ operating environment,” it said.