DESPITE the tough economic environment, credit microfinance institutions (MFIs) posted $9,8 million profit in the first nine months of 2018 on the back of increased demand for micro loans by individuals and small businesses, a report has shown.
According to the Zimbabwe Association of Microfinance Institutions (Zamfi)’s third quarter report, during the period, microfinance credit disbursed during the quarter amounted to $116,5 million, a significant increase from $87,3m disbursed during the quarter ending June 30, 2018.
“The strong outreach performance is a reflection of increased demand for microloans by both individuals and small business engaging in the productive sectors of the economy. The momentum is most likely to be maintained during the last quarter of the year, in view of the sudden surge in prices, which will most likely increase the amount of loans required by borrowers,” the Zamfi report said.
As of September 30, there were 196 credit only and six deposit-taking MFIs. Outstanding loans, as at the end of September 2018, were $176,4m, up from $137,1m as at June 30, 2018.
“For the nine months ending September 30, 2018, the microfinance credit only sector posted strong financial performance under an extremely challenging operating environment. The sector reported a net profit of $9,8 million, an increase by $5,57 million from $4,23 million registered for the six-month period up to June 2018,” the report said.
Loans to business and agriculture sector are 26% and 23% respectively, of the total loans of $176,5m.
The aggregate percentage of the two main sectors, which are a proxy of the productive sector, is 49% against 29,8% for the consumption sector, and 24% for other loans.
“It should be noted that lending by the microfinance sector to the agriculture sector, at 23% is, indeed, quite an outstanding achievement, as this is the sector directly related to food security and quick poverty alleviation among smallholder farmers. This sector is also difficult as farmers need to identify lucrative value chains, concentrate in areas where there are irrigation schemes and appropriate and timely technical back up service,” the report added.
Total income for the period under review amounted to $50,3m against total operating expenses of $40,5m.
This translated to an operational self-sufficiency of 124%, up from 116% reported in June 2018. This is marginally above the international benchmark of 120% expected for the sector.
The total assets for the microfinance credit-only sector amounted to $206,3m as at September 30, 2018.
The sector’s total assets were dominated by loans which constituted 87% of the total sector assets, while fixed assets, which represented non-interest earning assets, amounted to 4% of the total sector assets.
Aggregated equity and debt capital for the sector was reported to be $168,1m as at September 30, 2018, with debt capital being the largest share of capital amounting to $102m or 60,7% of total capital.
This aggregate level of capital represents the amount of liquidity available within the sector for on-lending to various economic sectors such as productive, agriculture and retailing.