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$200 million RBZ funding lies idle

25 May, 2018 - 00:05 0 Views

eBusiness Weekly

Taurai Mangudhla
Close to $200 million worth of funding under 13 different facilities with a bias towards supporting increased production is sitting idle at the Reserve Bank of Zimbabwe (RBZ) due to low uptake by targeted businesses, with latest figures showing only 54 percent of a combined $340,1 million package had disbursed as of March.

Specifically, $191 million worth of credit is yet to be disbursed, according to a presentation made by RBZ Deputy Governor Dr Jesimen Chipika at the Zimbabwe Association of Micro-finance Institutions winter school in Mutare last week.

Businesses have been complaining that many loan facilities meant for them are inaccessible due to stringent security requirements and fears by banks that beneficiaries will not be able to repay the debts.

Save for the business linkages and Fidelity Printers and Refiners (FPR) facilities that have more than 90 percent take up, the uptake of the funding under the majority of the various RBZ supported schemes remains low.

According to the central bank $79,5 million or 99,3 percent of the $80 million FPR gold support facility has been disbursed while 93,6 percent of the $10 million business linkages facility had also been taken up at the time of reporting. On the business linkages funding, $7,7 million was for working capital and the balance capex.

The RBZ said 54,7 percent of the $70 million export finance facility had been disbursed, $25,4 million for capex and $13 million working capital.

Other popular facilities, based on disbursement averaging 68 percent, are the tobacco facility through TIMB and the soya beans facility.

About 31,5 percent of the $10 million horticulture promotion facility has so far been utilised while only 11, 9 percent of the $15 million women empowerment facility had been disbursed. Only 1,2 percent of the 50 million tertiary educational loan facility had found takers while 0,04 percent of the $10 million youth empowerment fund was utilised.

There was absolutely no draw down on three facilities — namely for people living with disabilities and the other for tourism and the micro-finance revolving fund, cumulatively amounting to $30 million. Industry, currently suffering from lack of capital and foreign currency needs support to grow into the future and support economic growth.

Dr Chipika said micro-finance institutions (MFIs) had a key role to support economic growth through lending to all sectors especially given that Zimbabwe had one of the largest informal sectors in the world at 60,6 percent of GDP, only second to south American country, Bolivia, where the sector accounts for 62,3 percent of GDP, according to IMF 2018 figures.

Structure of MFIs

Zimbabwe’s total micro-finance portfolio stands around $254 million, translating to 0,25 percent of the global loan portfolio.

Zimbabwe had 183 registered MFIs, as at 30 April 2018. Four deposit taking MFIs were operational, the 5th is putting in place infrastructure to commence operations.

Dr Chipika said the number of branches increased marginally over the year from 659 as at 31 December 2017, to 682 as at 31 December 2017.

he said the micro-finance outreach had remained constrained with the total number of active clients of 323 286, against 3 million or 23 percent of the population that are financially excluded.

The proportion of women borrowers has oscillated in range between 30 percent to 40 percent over the past five years.

In terms of performance, Dr Chipika said profitability continued to be on the upward trend with the sector registering a 12,1 percent increase in net profits to $21,6 million for the period ended 31 December 2017, from $19,31 million the previous year.

However, there has been a sharp decline in Return on Assets (ROA) and Return on Equity(ROE) due to eight MFIs that had out-of-range ratios that averaged (-63,80 percent) and (-303,38 percent), respectively.

The portfolio size of MFIs has not registered significant growth over the year largely due to lack of adequate funding while the portfolio quality as measured by portfolio at risk (>30 days) has improved significantly since 2012 on the back of improved utilisation of the credit reference system expected to further improve portfolio quality.

Funding to the productive sector continues to be constrained as the majority of the sector resorts to salary-based consumer loans, which are less risky. Loans to the productive sector are expected to trend upwards as more MFIs access the Empowerment Facilities.

The Future of MFIs

Dr Chipika said given the dynamic operating environment, it was imperative for micro-finance institutions to transform themselves in order to stay competitive.

“Micro-finance is no longer the preserve of MFIs only — there are other non-financial competitors vying for the same target market. Taking micro-finance to the next level is a responsibility for all stakeholders,” she said.

The RBZ deputy governor also said that the potential of the micro-finance sector remained untapped, adding that technology, self-introspection and agility were like a space shuttle that could catapult microfinance to the next level.

Globally, micro-finance has emerged as an important catalytic tool in response to poverty among the low income and marginalised communities.

MFIs also create opportunities for the low income but economically active to participate in meaningful activities.

Dr Chipika said micro-finance is not only an innovative financial intervention in the lives of the low income and marginalized groups, but has also proved to be a transformative social and economic intervention, facilitating empowerment of the marginalised, in particular, the women, the youth and the micro and small enterprises.

MFIs, she added, contributed to the growth of financial markets — leveraging on technology and providing a wider array of financial products and services.

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