Zimbabwe’s microfinance sector is showing signs of strain, with the proportion of loans at risk edging higher, a latest central bank report has revealed.
According to the Reserve Bank of Zimbabwe (RBZ) quarterly industry report, the sector’s portfolio at risk rose to 10,68 percent as at 31 December 2025, from 10,53 percent recorded in June.
While the increase appears marginal, the figure is more than double the widely accepted international benchmark of five percent, signaling underlying vulnerability in the micro lenders’ loan books.
The central bank attributed the deterioration largely to borrower distress and internal weaknesses within some institutions.
“Over indebtedness on the part of the microfinance clients and weak credit risk management practices at some microfinance institutions continue to weigh down portfolio quality,” the RBZ said.
The regulator said it is closely tracking how institutions are responding.
“The RBZ continues to monitor the effectiveness of strategies that the institutions have put in place to address the non-performing loans,” the report stated, citing measures such as improved credit risk systems, broader loan diversification, and more aggressive recovery efforts.
Despite these credit challenges, the sector, however, recorded notable expansion over the past year.
Total loans surged to ZiG7,19 billion from ZiG5,16 billion, while total assets climbed to ZiG13,15 billion from ZiG8,60 billion.
Equity levels also strengthened significantly, rising to ZiG4,39 billion from ZiG2,74 billion.
But the growth has not translated into stronger profitability.
Net profit declined to ZiG0,86 billion from ZiG0,97 billion a year earlier, suggesting rising costs and inefficiencies.
Key performance indicators reinforce this view. Return on assets fell sharply to 6,53 percent from 11,28 percent, while return on equity dropped to 19,57 percent from 35,42 percent. Operational self-sufficiency also weakened, indicating that institutions are finding it harder to cover costs through core business activities.
Taken together, these figures suggest a sector expanding in size but under pressure to maintain financial health, a dynamic often seen when credit growth outpaces risk management capacity.
On the ground, conditions appear to be tightening for customers.
The number of active loan clients declined significantly to 422 358 from 574 385 in 2024, while the volume of outstanding loans also fell.
This contraction could reflect a combination of stricter lending criteria by institutions and reduced borrowing appetite or capacity among clients already grappling with debt burdens.
The data also reveals shifting dynamics among female borrowers, a key segment in microfinance.
The total value of loans extended to women rose strongly by 53,4 percent to ZiG2,27 billion, yet the number of female borrowers dropped by 30,5 percent to 183 178.
This suggests that while fewer women are accessing loans, those who do are taking on larger amounts.
Similarly, the overall number of outstanding loans declined sharply by 51,7 percent, pointing to a more cautious lending environment.
Even as lending activity moderated, the sector continued to widen its reach. Branch and agent networks expanded to more than 4 000 outlets, driven by new market entrants and increased digitalisation.
In total, 22 new credit-only microfinance institutions were registered during the period, bringing the number of licensed players to 323 by year-end. – TML