ZSE-Listed microfinance bank, GetBucks has recorded a significant decline in transactional volumes owing to high levels of informalisation in the economy that has swayed potential depositors away from the formal banking system, the company has said.
In its latest trading update, the financial institution reported a 5.8 percent decline in transactional volumes during the five months to May 31, 2021- worsened by the COVID-19 disruption to business in January and February this year.
“The trading environment in the five months to May 31, 2021 was slow and challenging, impacted on by the two months of lockdown at the beginning of the year. This, together with a system downtime experienced during the period, saw transactional volumes decrease 5.8 percent over the comparable year ago period,” Getbucks chief executive George Nheweyembwa said.
Owing to inflation in both the local currency and in US Dollar terms, public confidence in the local banking sector took a hit as the pre dominantly informal transacting public preferred hard cash as opposed to depositing funds in the banking system.
Annual Inflation- despite slowing down this year- remains above sustainable levels reaching 106, 64 percent in May, that’s according to the Zimbabwe National Statistics Agency (Zimstat).
“The growing disparity between the formal and informal sector does not augur well for banking with the informal preferring to keep their funds as US$ cash away from the banking system,” said Nheweyembwa.
During the period, the company recorded total income of ZWL$ 145 million in inflation adjusted terms against operating expenses of ZWL$ 79.835 million.
Profit in inflation adjusted terms reached ZWL$ 10.767 million from ZWL$ 7.768 million recorded in 2020.
Interest income was driven by improved lines of funding and an increased base in the loan book.
Total loans increased to ZWL$ 198 million in May 2021 from ZWL$ 93.6 million in January 2021 with the Consumer sector constituting the bulk of the loan book at 68 percent.
“The increase in loan book is attributed to the bank’s focus on increase sales for both consumer and non-consumer loans. The loan book quality improved over the period under review as evidenced by a decline in non-performing loans,” said the microfinance bank.
In order to meet the regulatory capital requirements of US$5 million by December 31, 2021, the bank will pursue an equity transaction, which will include a share placement programme. This is in addition to anticipated organic growth in profits.