Loan uptake low despite rate cut – Zamfi

Harare, (New Ziana) – The Zimbabwe Association of Microfinance Institutions (Zamfi) said on Thursday the recent cut in interest rates by the central bank had yet to stimulate demand for loans due to high inflation and volatile exchange rates.

It said in the quarter ending December 2019, micro-finance institutions saw their loan book marginally grow to $379.3 million from $352.2 million in the previous quarter.

The number of clients served during that period was down 0.56 percent to 197 343, compared to the previous quarter.

“This worrying trend is in spite of the significant reduction in overnight rate from 70 percent to 35 percent by the Reserve Bank of Zimbabwe Monetary Policy Committee, which was meant to stimulate lending by financial institutions including microfinance,” Zamfi said.

The RBZ cut the interest rate late in November last year.

Zamfi said high inflation and exchange rate instability were hitting on demand for loans.

“These twin challenges have created an environment of uncertainty among individuals and companies leading to low capital investment across all sectors of the economy including microfinance,” Zamfi said.

The association said current central bank efforts to stabilise the currency and inflation would at least take 12-18 months before they start to bear fruit.

During the quarter, the sector saw its revenues jump to $137.2 million
from $78.2 million the previous quarter.

Its profit before tax doubled to $$21.8 million from $11.9 million.

“Positive returns on assets and equity have been recorded, with an impressive achievement of 15.4 percent on return on equity,” Zamfi said.

“This is a clear indicator of the good prospects for profitability being enjoyed by shareholders that have invested in the sector.”
New Ziana