Micro-finance lenders overwhelmed by the demand for loans

By Stanley James

Business Editor

ZIMBABWE’s retail and distribution sectors are dominating the Micro-Financial Institution’s (MFI) loan book due to increased participation by informal traders.

Presenting the state of affairs for micro-financial institutions this year, Zimbabwe Microfinance Fund Managing Director, Mr Brian Zimunhu revealed that despite high costs of borrowing, the appetite for loans in the retail sector is on an upward trajectory.

“The retail sector is dominating our loan book maybe due to the size of their nature and scale of business they need short term loans hence their ability to get the loans, purchase stock and repay, however, the worrying trend is how we can sustain the borrowing costs given the
resurfacing inflationary pressures,” said Zimunhu.

Zimbabwe Association of Micro-Finance Institutions Executive Director, Dr Godfrey Chitambo outlined how the sector will operate in line with the prevailing economic conditions in terms of loan provisions and viability.

“The prospects for us to maintain viability are there but that will also largely depend on how most of us can sustain the operating costs and balance books while conforming to the required or stipulated standard procedures,” said Dr Chitambo.

Regulatory authorities continue to review the operating terms of micro-finance institutions, to wipe out bogus or unregistered players.

The 2022 monetary policy statement states that the microfinance industry continues to register resilience and growth in key performance indicators after the relaxation of Covid-19 related- restrictions.

It also shows that the number of active clients accessing loans through microfinance institutions increased by 10.66 percent from 288 561 as of 31 December 2020, to 307 673 as of 31 December 2021.

The industry also recorded an increase in the number of women accessing loans during the year under review from 116 043 to 146 253 as of 31 December 2021.

The value of loans to female borrowers, over the same period, increased by 241.10 percent from ZWL$673.22 million to ZWL$2.30 billion Zimbabwe dollars as of 31 December 2021.

The statement states that a total of 28 credit-only microfinance institutions were non-compliant with the minimum capital requirements of US$25 000 effective 31 December last year.

It also noted that the non-compliant institutions are putting in place re-capitalisation strategies to comply with the requirements and to facilitate the underwriting of more meaningful business.