THE credit-only microfinance sector says its operations are being threatened by the outbreak of Covid-19 despite registering a 23,7 percent growth in total loan book to $469,2 million in the first quarter ended March 31, 2020 compared to $379,3 million in the previous quarter.

The Zimbabwe Association of Microfinance Institutions (Zamfi) revealed this in a quarterly performance report for the period under review.

The quarterly period of January to March 2020 saw most Sadc countries implementing lockdowns in a bid to curb the spread of the Covid-19 pandemic, which negatively affected business operations.

However, the quarterly performance figures were less reflective of the Covid-19 pandemic impact. This, Zamfi said, was because Government instituted a lockdown period, which commenced on March 30, 2020.

“The quarterly performance figures for the quarter ending March 2020 are less reflective of the Covid-19 induced negative effects.

“The surge in total loan book of the credit-only microfinance sector, from ZW$379,3 million as at 31 December 2019 to ZW$469,2 million as at 31 March 2020 was primarily driven by borrowing to meet expenditure obligations such as school fees, household food requirements and working capital to finance income generating projects,” said Zamfi.

“It should be noted that the pandemic effects cannot be told only in figurative terms, but require also the qualitative side of analysis.”

Zamfi said while its loan portfolio remained stable for the period under review, the post-lockdown period puts tremendous pressure on microfinance credit systems of disbursements and repayments, especially on MFIs (micro finance institutions) that had lagged behind in the implementation of Information Communication Technology systems.


During the lockdown period, the central bank on its part including Zamfi, issued a series of advisory guidance notes to the sector meant to protect individual MFIs from Covid-19.

“These took the form of measures on credit relief and loan restructuring in a bid to manage the credit risk and defaults within the respective portfolios of MFIs,” it said.

Due to factors primarily linked to economic recessions such as inflation and volatile exchange rate, which existed prior to the Covid-19 pandemic outbreak, the first quarter results were negatively affected, resulting in the reporting of lower than expected profit for the three months period.

The microfinance credit-only total financial income amounted to ZW$85,4 million against operating revenue of ZW$83,4 million, which then translated to a net profit of ZW$2 million and Operational Self Sufficiency ratio (OSS) of 102 percent, which is far much lower than the international benchmark of 120 percent.

The return of assets and equity were 0,3 percent and 1,5 percent respectively.

“The same results for last year quarterly period of March 2019, were net profit of ZW$4,5 million, OSS (117 percent), return on asset (1,8 percent) and return on equity (6,2 percent).

“These results, in real terms could be far worse if hyperinflation accounting is applied, which takes into account both inflation and foreign exchange losses on assets and liabilities driven by devaluation of the Zimbabwe dollar against the United States dollar,” said Zamfi.

“The upcoming figures for the six months period under the negative effects of coronavirus and lockdown rules, points to a gloomy outlook on profitability and sustainability of the sector, which can only be arrested if individual MFIs take bold and honest decisions to restrategise, recapitalise and remodel their business lending activities in line with the new ‘normal’ operating environment.”

Zamfi said to this end and to help MFIs reboot themselves, it shall be offering a one-day course during the quarter period. — @okazunga

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