Royal Bank mulls downgrading to MFI

THE now defunct Royal Bank is considering downgrading to a microfinance institution (MFI) as the bank plans to embark on a restructuring programme mired in controversy, NewsDay has learnt.


According to the bank’s court papers opposing a Reserve Bank of Zimbabwe High Court application seeking for a final order to liquidate the financial institution, Royal Bank, which surrendered its operating licence last July due to capital constraints, wants to bounce back into the financial services sector.

In its discussion document titled: Royal Bank Limited Proposed Restructuring and Recapitalisation, the commercial bank last month engaged local external auditors PFK Chartered Accountants as financial advisors to craft its comeback bid.

The bank, which according to the documents owned land and buildings valued at $4,8 million, contends that it needed to restructure to settle the $3,7 million debt owed to its major creditors.

“Having considered the challenges faced by Royal Bank, both financially and in terms of market capitalisation, PFK have assessed the various options available to Royal Bank,” reads the document in part.

“In this regard, it is proposed that Royal converts its banking licence to microfinance licence. The capital requirement for microfinance (institutions) is manageable compared to banking licence. This will also allow Royal Bank adequate time to rebuild its brand and image. Microfinance organisations enjoy better margins than commercial banks.”

As part of Royal Bank’s restructuring programme, PFK also advised that the bank can also restructure its balance sheet through conversion of major current liabilities into equity or long debt through a scheme of arrangement.

The financial advisor also proposed that Royal could also raise funds through issue of equity shares and convertible debentures, with the funds to be applied against the repayment of the bank’s depositors and other liabilities, including the provisional liquidators costs.”

Funds raised from the private placement, the PFK advised, would also be used to roll out the proposed MFI.

Last year, the central bank raised the minimum capital levels for MFIs to $5 million from $1 million in a bid to minimise systemic risks in the banking sector.

With Royal converting into an MFI, could this be a case of jumping from the frying pan to the fire?

Already the central bank has during the past year closed two deposit accepting MFIs for breaching the Banking Act.

Experts say, low disposable incomes and marginal salary adjustments by some companies on the back of a rising cost of living, has forced the public to rely on MFIs which have less stricter borrowing requirements compared to traditional banks.

Royal Bank was re-licenced in October 2010 and granted a two-year grace period to meet the then $12,5 million minimum capital requirements.

The bank, however, failed to raise the capital.




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  1. will be very hard to get a clientele as the form of business has changed,moreso the temptation to accept deposits will be great.

  2. It is better to take this channel, coz Ecocash and its TN bank are going to set pace and transform the banking system very soon… most banks will struggle to get clients.

  3. Zibeko Mgabhi

    PFK? Are these guys for real? Liquidate Royal, as they have caused the public enough pain

  4. hope RBZ will not give them MFI licence tanzwa navo isu imbavha dzevanhu

  5. MFI is a better option. In any case the proposal will allow Royal to spruce up its tattered image.

  6. Mfi vane hutsinye and the government just watches them. The intrests are too much.

  7. my late fathers pension was deposited @ royalbank in march 2012 and they failed to give us before it was closed….right now we are tenants because of you royalbank w should have built our house last year…nxaa i hate you

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