MICROCAPITAL BRIEF: ZAMFI Blames Zimbabwe’s Liquidity Challenges for Microfinance Portfolio-at-risk (PAR) Ratio Surpassing 12%

The Zimbabwe Association of Microfinance Institutions (ZAMFI), a 100-member advocacy group, recently announced its members’ aggregate portfolio-at-risk (PAR) ratio rose from 8.3 percent in December 2016 to 12 percent in March 2017, citing both “corporates and individuals fail[ing] to honour their debt obligations due to the liquidity crisis.” Zimbabwe’s central bank reports a 5-percent cash-to-deposit ratio. Ashok Chakravarti, an advisor to the country’s president, reportedly stated, “If an economy has got less than 12 percent, it faces a liquidity crisis.”

The rise in PAR may signal trouble for MFIs. In a report on microfinance performance indicators, the Inter-American Development Bank (IDB) and US-based firm MicroRate argue that “generally speaking, any portfolio at risk exceeding 10 percent should be cause for concern.”

Godfrey Chitambo, the head of ZAMFI, was quoted as having said microfinance institutions (MFIs) “are battling a number of challenges, chief among them being high levels of [non-performing loans], dwindling funding and high cost of acquiring technology.” He added that this is leading some MFIs to seek merger opportunities.

Established in 1999, ZAMFI promotes the interests of its members among other financial institutions, donor agencies and government bodies.

By Jacob O’Driscoll, Research Associate

Sources and Additional Information

Microfinance Institutions Hit Turbulent Waters

Zimbabwe in liquidity crisis


IDB Performance Indicators for Microfinance Institutions: Technical Guide

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