THE Zimbabwe Association of Microfinance Institutions (Zamfi) has urged players in the sector to be innovative and introduce new products that are designed as low risk and have high returns for the benefit of the borrowing clients.
In its 2023 microfinance sector performance analysis report, Zamfi said industry players should support borrowing clients who have stood with them through difficult times.
“As at December 31 2023, profitability and sustainability as measured by operational self-sufficiency ratio return on asset and equity was of 169,3%, 20,8% and 89,9% compared with 157,3%, 13,5% and 58,6% reported 30 September 2023, respectively.”
Capital adequacy for the sector was rated strong during the period with the credit — only microfinance sector reporting aggregate equity capital of ZWL$108,5billion, up from ZWL$98,7 billion reported for the quarter ending September 30, 2023.
Debt capital amounted to ZWL$281,8 billion during the period, a jump from ZWL$163,5 billion recorded the previous quarter.
The aggregate of equity and debt represented total capital available for funding amounting to ZWL$390,3 billion during the period.
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Zamfi added that the capital, being a combination of local currency and foreign-denominated capital, was not under threat of foreign exchange risks.
“This is being made possible by the government extension of the use of the multi-currency system to 2030 and central banks authorisation of lending in US$ for microfinance institutions,” it said.
“Going forward, the sector is poised for incremental growth as more individuals and business clients quickly seek funding from the microfinance sector, which is not entirely guaranteed from the banking sector.
“The microfinance business model is known for being agile and easily adaptable to dynamic changes and shifts in the operating environment including demands from the borrowing clients.”
Zamfi urged the government to be consistent in policy making and implement credible policies aimed at solving social-economic challenges.
The microfinance sector, like the rest of the financial services sector, has also been victim to policy inconsistencies especially around currency resulting in massive loss of value.
The association said the overall performance of the sector for the financial year under review, reflected an industry that has remained resilient and financially sustainable in spite of the many economic headwinds characterised by rapid depreciation of the local currency, price instability, geopolitical events and sluggish economic growth.
During the year, the sector reported total income of ZWL$238,2 billion against total operating expenses of ZWL$140,6 billion, leading to a net profit position of ZWL$97,6 billion.
Due to the existence of a multi-currency regime, Zamfi said both the revenue streams and cost drivers of the business were largely being gained and incurred in hard currency and as such contributing to the sustainability of the sector.