Zim microfinance delinquency levels jump | Fin24
  • Disposal?

    Sasol may be planning to sell its South African coal-mining operations.

  • National Carrier

    Fixing SAA means overcoming an 'organised crime syndicate', says ex-prosecutions boss Vusi Pikoli.

  • Fin24’s newsletter

    Sign up to receive Fin24's top news in your inbox every morning.


Zim microfinance delinquency levels jump

Jul 11 2014 12:40
Malcom Sharara, Fin24's correspondent in Zimbabwe

Related Articles

Zim tobacco set for bumper season

Harare - Delinquency levels in Zimbabwe’s microfinance sector have worsened to 27.14%, a report by the Reserve Bank of Zimbabwe (RBZ) has shown.

In its quarterly microfinance industry report for the quarter ended March 31 2014, the RBZ said portfolios at risk level for the microfinance industry had jumped to 27.14% from 16.03% for the quarter ended December 31 2013.

Analysts said generally any portfolio at risk exceeding 10% should be cause for concern, because unlike commercial loans, most microcredits were not backed by bankable collateral.

The RBZ said the high portfolio at risk ratio was largely attributed to multiple borrowings on the background of high interest rates.

Interest rates of up to 18%

Interest rates in the sector range from between 5% and 12% per month, but can go as high as 18% when dealing with unregistered or unscrupulous institutions.

The RBZ said the high interest rates charged by the microfinance institutions had precipitated a high level of indebtedness among the microfinance clients. This goes against the financial inclusion objective of microfinance.

Most of the loans, amounting to US$121.08m or 71.22% of the total, went towards consumption with the balance going towards the productive sector.

'Pathway to poverty'

A total $170m was given out by the microfinance institutions in the quarter under review, up from $164.2m in the December 2013 quarter.

Analysts said the microfinance model currently in use has largely deviated from the initial intentions.

"Ideally microfinance loans are meant to go into supporting income-generating micro-enterprises but have often been used to support current spending, and the result has been a disastrous and irreversible pathway into chronic poverty."



Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Comments have been closed for this article.

Company Snapshot

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

What's your view on deep sea mining?

Previous results · Suggest a vote