Majority of micro finance institutions undercapitalised

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By Alois Vinga

THE majority of deposit taking microfinance institutions (DTMFIs) are struggling to fully capitalise in what could limit them from playing a meaningful role in economic development, latest data from the Reserve Bank of Zimbabwe (RBZ) has revealed.

Microfinance institutions play a critical role in assisting typically poor households and small enterprises in gaining access to financial services, in the process supplementing other private or public objectives such as the maximisation of shareholder value.

But the central bank governor, John Mangudya recently revealed that the majority of such institutions are struggling to be well capitalised.

“As at 31 December 2022, the deposit-taking microfinance institutions (DTMFIs) subsector was not adequately capitalized, with only two (2) out of the seven (7) operating deposit-taking microfinance institutions being compliant with the minimum capital requirements of the ZW$ equivalent of US$5 million.

“The sub-sector has not been able to significantly grow its capital over the year with some of the DTMFIs posting losses since inception,” he said.

According to the RBZ regulations, all banking institutions must meet a minimum capital requirement of US$5 million.

However, only two institutions which are: African Century Bank and Innbucks Microbank have capital thresholds well above the minimum requirement.

Non-compliant institutions are Success Microfinance Bank currently sitting on US$2,66 million capitalisation, Zimbabwe Women’s Microfinance Bank at US$1,03 million, Empower Bank at US$1,94 million, GetBucks at US$0,64 million and Lion Microfinance Bank at US$0,21 million.

 “Aggregate core capital for the sub-sector of ZW$11.68 billion as at 31 December 2022 represents a 17.51% increase over the quarter from ZW$9.94 billion as at 30 September 2022,” said Mangudya.

He underscored that the DTMFIs need to be adequately capitalised on an ongoing basis to capacitate the institutions to play a more critical role in fostering financial inclusion.

“In this regard, the Boards and shareholders should remain resolutely focused on implementing measures including viable strategic options that bolster the institutions’ capital levels,” he added.