MICROCAPITAL BRIEF: Citing High Repayment Rates, FINCA Zambia to Reduce Rates, Charge Interest Based on Declining Balance

FINCA Zambia Limited, a Zambian microfinance institution (MFI) affiliated with US-based nonprofit FINCA International, plans to reduce its effective lending rates in 2012 by 20 percent after having experienced a repayment rate of 97 percent during the 2011 fiscal period. FINCA Zambia has begun calculating interest charges based on the declining balance of clients’ loans, replacing a “flat” interest rate policy whereby clients pay interest on the full loan amount throughout the loan period. The declining balance method reduces effective rates so much that the quoted “sticker” rate on the loans will rise, although the amount of interest actually paid by borrowers will go down. Codes of responsible conduct for MFIs sometimes forbid charging interest on a “flat” basis.

FINCA Zambia CEO Keith Sandbloom reportedly said that loans of ZMK 57 billion (USD 11 million) are estimated to have been disbursed by the end of 2011.

As of 2010, FINCA Zambia Limited reports to the Microfinance Information Exchange (MIX) USD 4.9 million in assets, a gross loan portfolio of USD 2.8 million, 13,700 active borrowers, return on assets (ROA) of 5.13 percent and return on equity (ROE) of 13.2 percent.

About FINCA Zambia Limited
FINCA Zambia Limited is an affiliate of FINCA International, is a nonprofit microfinance network serving 700,000 people through subsidiaries in 21 countries. As of 2010, FINCA Zambia Limited reports to the US-based nonprofit Microfinance Information Exchange (MIX) USD 4.9 million in assets, a gross loan portfolio of USD 2.8 million, 13,700 active borrowers, return on assets (ROA) of 5.13 percent and return on equity (ROE) of 13.2 percent.

About FINCA International
Founded in 1984 by Dr John Hatch, a pioneer of the village banking model, the Foundation for International Community Assistance (FINCA) International is a microfinance network based in Washington, DC, that provides financial services to poor families through a network of locally managed institutions. FINCA targets its services to poor women living in the Americas, sub-Saharan Africa and Eurasia. In the 2010 fiscal year, FINCA International served approximately 760,000 clients through its subsidiaries in 21 countries. As of 2010, it had total assets of USD 496 million, with an operating profit of USD 10 million.

By Ariana Malushi, Research Associate

The Post Online: “FINCA to slash lending rates”
http://www.postzambia.com/post-read_article.php?articleId=24264

MicroCapital.org article, November 17, 2011, “MICROCAPITAL BRIEF: Triple Jump Makes Equity Investments For ASN-Novib Microkreditfonds in Microfinance Institutions (MFIs) in Tanzania, Zambia, Panama”
https://www.microcapital.org/microcapital-brief-triple-jump-makes-equity-investments-for-asn-novib-microkreditfonds-in-microfinance-institutions-mfis-in-tanzania-zambia-panama/

MicroCapital.org article, November 15, 2011,
“MICROCAPITAL BRIEF: responsAbility Lends $8.2m to Microfinance Institutions (MFIs) FINCA DRC, Bandhan of India, Opportunity Microcredit Romania”
https://www.microcapital.org/microcapital-brief-responsability-lends-8-2m-to-microfinance-institutions-mfis-finca-drc-bandhan-of-india-opportunity-microcredit-romania/

MicroCapital Universe Profile: FINCA Zambia Limited
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=FINCA+Zambia+Limited

MicroCapital Universe Profile: FINCA International
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=FINCA+International

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