MICROCAPITAL BRIEF: PKF Chartered Accountants Advises Royal Bank Zimbabwe to Downscale to Microfinance Institution

PKF Chartered Accountants, the Zimbabwean member of UK-based businesses services firm PKF International, reportedly has advised Royal Bank Zimbabwe Limited, a defunct bank, to convert its commercial banking license to a microfinance institution (MFI) license, which carries lower capital requirements set by the Reserve Bank of Zimbabwe (RBZ), the country’s central banking institution. In July 2012, Royal Bank surrendered its operating license because it was not able to meet the minimum capital requirement of USD 12.5 million. The minimum capital requirement for MFIs is USD 5 million, which PFK advised would be manageable for Royal Bank to maintain while it undergoes a process of restructuring and recapitalization.

PKF reportedly advised the bank to restructure its balance sheet by converting major current liabilities into equity or long-term debt. PKF also proposed that the bank raise funds by issuing equity shares and convertible debentures, with the funds to be used to repay liabilities including customer deposits and liquidation costs. The report “Royal Bank Limited Proposed Restructuring and Recapitalisation,” which outlines the details of the program has not been released to the public.

By Jennifer Young, Research Associate

About Reserve Bank of Zimbabwe (RBZ)
Founded in 1956 as the Bank of Rhodesia and Nyasaland, the Reserve Bank of Zimbabwe (RBZ) is responsible for the formulation and implementation of monetary policy in Zimbabwe and undertakes the supervision of the country’s financial sector including commercial banks and financial institutions. Dr. Gideon Gono was appointed governor of the institution in 2003 and continues to serve in that capacity as of 2012.

About PKF International Limited (PKFI)
PKF International Limited (PKFI) is a UK-based business services firm with 330 member firms in 125 countries. The firm was founded in 1969 by Pannell Kerr Forster when four accounting firms from Australia, Canada, the United Kingdom and the United States joined to create an international association. Financial information is not available for PKFI.

Sources and Additional Resources

News Day Story, “Royal Bank Mulls Downgrading to MFI,”
http://www.newsday.co.zw/2013/05/02/royal-bank-mulls-downgrading-to-mfi/

MicroCapital Story, January 10, 2013, “MICROCAPITAL BRIEF: Zimbabwean Government’s Small Enterprises Development Corporation (SEDCO) Looking to Collect Microsavings to Bailout Itself,”
https://www.microcapital.org/microcapital-brief-zimbabwean-governments-small-enterprises-development-corporation-sedco-looking-to-collect-microsavings-to-bailout-itself/

MicroCapital Story, December 21, 2012, “MICROCAPITAL BRIEF: Government Hopes Zimbabwe Microfinance Wholesale Facility Can Lower Microfinance Institution Interest Rates That Reportedly Hit 40% Monthly,”
https://www.microcapital.org/microcapital-brief-government-hopes-zimbabwe-microfinance-wholesale-facility-can-lower-microfinance-institution-interest-rates-that-reportedly-hit-40-monthly/

MicroCapital Story, February 22, 2012, “MICROCAPITAL BRIEF: Lacking Credit Bureau, Zimbabwean Microfinance Struggles with Consumer Protection,” https://www.microcapital.org/microcapital-brief-lacking-credit-bureau-zimbabwean-microfinance-struggles-with-consumer-protection/

MicroCapital Universe Profile: Reserve Bank of Zimbabwe (RBZ)
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Reserve+Bank+of+Zimbabwe

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