BY TATIRA ZWINOIRA
CREDIT from micro-finance institutions in the second quarter of 2019 increased by 26,4% to $316,3 million from the previous quarter’s $250,1 million due to an increase in productive loans.
A Zimbabwe Association of Micro-Finance Institutions (Zamfi) performance report for the first-half of the year released yesterday indicated that the agricultural sector was the major recipient.
“The credit-only micro-finance sector total loan book significantly increased from $250,1 million as at March 31, 2019 to $316,3 million as at June 30, 2019, constituting an increase of $66,2 million (26,4%). The previous quarterly increase (January to March period) was $18,5 million, indicating that the sector is increasing its lending,” read part of the report.
“As indicated below, the sector that received most of the funds from MFIs is agriculture [35%] and the productive sector (29%), representing a total of 64% of the loan book. This is a significant shift of the micro-finance business away from the traditional consumption loans, generally regarded as less productive and inflationary.
“The support of the productive sectors of the economy by the MFIs resonates very well with current government efforts to increase the production of goods and services.”
While there was improvement in the quarter-to-quarter lending, Zamfi reported that the total for non-performing loans (value of loans in arrears by more than 30 days) was $46,05 million.
“This constitutes 14,58% of the total loan portfolio and as such, represents a deterioration of the quality of the loan portfolio compared with 11.01% reported in March 2019. The international benchmark of PAR ratio is 5%,” read part of the report.
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“The main reason for the high delinquency level is the adverse external macro-economic environment characterised by high inflation and a sudden deterioration in income levels of the majority of clients for the MFIs. Major policy changes such as introduction of the new currency (Zimdollar), interbank market for foreign currency trading and a slow adjustment of workers’ salaries by many employers has left many clients highly exposed to over-indebtedness.”
In that regard, Zamfi called for a “significant” increase of wages and salaries in both the public and private sectors to improve on loan repayments.