• Izwe's profit increased 26% to K112.2 million despite a 4% decline in net interest income
• Merchant financing and point-of-sale transactions drove a 96% increase in fees and commissions
• TN CyberTech derives 85% of its combined income from non-interest sources as Zimbabwe caps bank charges

Harare – Zambia's Izwe Loans Zambia has recorded a 26% increase in profit after tax to K112.2 million (approximately US$6.23 million) for the six months ended 30 June 2026, supported by a near doubling of fee and commission income as its merchant financing and point-of-sale operations expanded. The performance, disclosed in unaudited results issued on 21 September, highlights the growing contribution of transaction-based financial services to profitability at a time when Zimbabwean lenders pursuing similar models face tighter regulatory restrictions on banking charges.

According to the results, operating income increased 15%, equivalent to approximately K46 million, while profit before tax rose 25% to K168.1 million (US$9.34 million). Net fees and commissions surged 96% to K118.2 million from K60.5 million, offsetting a 4% decline in net interest income to K244.1 million (US$13.57 million). The contrasting movements reflect a change in Izwe's revenue composition, with traditional lending remaining its largest income source while merchant-facing products increasingly drive growth.

Combined net interest and fee income reached K362.4 million, of which fees accounted for 32.6%, compared with just 19.1% during the corresponding period of 2025. The 13.5-percentage-point shift is significant because transaction services can generate recurring revenue without requiring a proportionate increase in loan balances. Merchant financing can still involve credit exposure, but its integration with payment systems creates opportunities to earn from both financing and customer transaction activity.

Izwe's expansion offers a useful comparison with Zimbabwe's TN CyberTech Bank, where non-interest income has already become the dominant component of the revenue structure. During the six months ended June 2026, TN generated ZWG516.7 million in non-interest income against ZWG92.1 million in net interest income, leaving non-funded activities responsible for approximately 85% of combined income.

Administration fees contributed ZWG146.7 million, transaction processing fees ZWG120.2 million, dealing income ZWG158.8 million and commissions ZWG37.9 million. The figures illustrate the scale of TN's dependence on customer transactions and other financial services beyond conventional lending. With customer deposits of ZWG5.07 billion against gross loans of ZWG928.8 million, its gross loans-to-deposits ratio stood at approximately 18.3%, indicating that lending remains relatively modest compared with the funding attracted by the institution.

The distinction between the two institutions lies in their stages of income diversification. Izwe is expanding fee-based revenue from a lending-dominated base, while TN already generates substantially more from non-interest activities than from interest margins. Their operating models demonstrate the commercial opportunities available to institutions capable of combining digital distribution, payment processing and financing products, although they also carry different exposures to regulation and transaction pricing.

Zimbabwe's regulatory environment introduces an important constraint. In its February 2026 Monetary Policy Statement, the Reserve Bank directed banking institutions and deposit-taking microfinance institutions to implement reduced charges by 31 March 2026. Cash withdrawal fees were capped at 2% of the transaction value, while point-of-sale, bank-to-wallet, wallet-to-bank and send-money charges were limited to 1.5%, subject to a maximum of US$20 or the ZiG equivalent.

ZIPIT charges were capped at 2%, while account balance enquiries and cash deposits became free. Banks were also required to exempt qualifying low-balance accounts from charges and remove transaction fees on POS payments below US$5 equivalent. Card issuance and replacement fees were restricted to cost-recovery levels.

These interventions directly affect the pricing flexibility of transaction-driven financial institutions. Higher payment volumes can support fee income, but institutions cannot necessarily improve revenue by raising charges per transaction. The regulatory framework consequently places greater emphasis on expanding customer numbers, improving digital infrastructure and lowering the cost of processing individual payments.

For TN CyberTech, the exposure is particularly relevant given its substantial administration and transaction-processing income. However, the restrictions do not eliminate all non-interest revenue. Foreign exchange dealing income, permissible commissions and other financial services remain subject to their applicable regulatory frameworks, meaning the bank's entire ZWG516.7 million non-interest income base is not directly exposed to the same fee ceilings.

Nor do the published figures establish that the new restrictions have already reduced TN's earnings. They indicate the importance of transaction pricing within its business model and the commercial adjustments required as Zimbabwe's banking regulator prioritises affordability and financial inclusion.

InnBucks MicroBank provides another comparison through its expansion in digital lending and transaction services. For the six months ended December 2025, InnBucks reported profit after tax of ZWG99.5 million, approximately three times the ZWG33 million recorded in the corresponding period. Net fees and commissions rose from ZWG58.8 million to ZWG176.3 million, while trading and foreign exchange income increased from ZWG26.6 million to ZWG176.5 million.

Its gross loan portfolio reached approximately ZWG1.86 billion, reflecting a more pronounced expansion in lending alongside fee generation than Izwe's latest results. The reporting periods differ, but the performance demonstrates the potential for digital distribution to support several income streams simultaneously.

GetBucks Microfinance Bank presents a different experience. The Zimbabwean lender recorded an approximately 80% decline in profit after tax to ZWG6.2 million for the six months ended June 2026, from ZWG30.9 million previously, amid weaker interest income, lower fees and declining returns from gold-backed lending activities. Management has identified digital product development and technology investment as priorities for rebuilding profitability.

The divergence highlights the importance of execution. Digital financial services can expand market reach and transaction activity, but sustainable profitability still depends on pricing, customer utilisation, operating costs and credit quality. Zimbabwe's fee restrictions add pressure to improve efficiency rather than relying on higher transaction charges.

Izwe's own financial position demonstrates that income diversification does not eliminate balance-sheet demands. Total assets increased 15% to K2.76 billion (US$153.3 million), while net loans and advances grew by a more modest 6%. Total liabilities rose 17% to K2.05 billion (US$114.1 million), supported by a 16% increase in borrowings to finance working capital and earning assets.

The disparity between asset growth and lending expansion suggests that Izwe's evolving business model requires a broader assessment than loan-book growth alone. However, the summary results do not provide sufficient detail to establish the contribution of individual merchant financing products or changes in credit quality.

Operating expenditure increased 18%, equivalent to approximately K25 million, exceeding the 15% growth in income. Management attributed the additional costs to inflation and investments in technology, product development and customer services. Although profitability improved, the faster growth in expenses indicates that the company must generate stronger operating leverage as its transaction business scales.

Funding and cash flow warrant similar attention. Net operating cash flow reversed from a K291.9 million inflow to a K26.8 million outflow, while cash and cash equivalents, net of bank overdrafts, declined from K110.9 million to K8.5 million. Management attributed the cash movement to working capital requirements and maintained that liquidity remained adequate.

The company also paid K100 million in dividends, equivalent to approximately 89% of its reported half-year profit. Total equity nevertheless increased 11% to K704.9 million (US$39.2 million), representing approximately 25.5% of assets. This accounting measure provides an indication of shareholder funding, although the announcement did not disclose the regulatory capital adequacy ratio needed for a more complete assessment.

The payout raises an important capital allocation consideration. Izwe is simultaneously distributing a substantial proportion of earnings, increasing borrowings and investing in new financial services. Sustaining this combination will depend on reliable cash generation, funding availability and disciplined credit risk management.

January 2026 changes to the Bank of Zambia's risk-weighted asset methodology for non-bank financial institutions add a regulatory dimension. Izwe reported that it remained adequately capitalised under the revised framework, but future disclosures will need to establish the extent of its capital headroom as the business expands.

Zimbabwe's experience provides a useful regional test of Izwe's strategy. TN CyberTech demonstrates how a financial institution can become heavily dependent on transaction and other non-interest income, while InnBucks illustrates the potential to expand lending and fees together. GetBucks reveals the earnings pressure that can emerge when traditional income streams weaken before new products generate sufficient revenue.

For Izwe, the next phase of growth will depend on translating its 96% increase in fee income into durable operating efficiency while managing rising borrowings, cash requirements and credit exposure. Zimbabwe's restrictions also demonstrate how regulatory priorities can alter the economics of transaction-led banking, placing greater value on scale, affordability and technology efficiency.

Izwe has demonstrated that profits can grow even when lending income declines. Its challenge is to preserve that momentum as its merchant financing operations expand, while the Zimbabwean experience shows that the strongest digital financial models will increasingly depend on transaction volumes and cost efficiency rather than the ability to charge customers more.

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