Investees | Zimbabwe | NMBZ
Our initial stake in NMBZ Holdings Limited (“NMBZ”) was acquired from two of our shareholders at the time Arise was formed.

NMBZ’s principal subsidiary is NMB Bank (formerly National Merchant Bank of Zimbabwe), a key financier and banker to the SME sector in Zimbabwe providing a wide range of financial products and services. NMBZ commenced operations as an accepting house license in May 1993. After recording phenomenal growth in its initial years, NMBZ was floated on the Zimbabwe Stock Exchange in 1997, before the authorities granted it a commercial banking license in December 1999.
Country Overview

Zimbabwe has since the early 2000s experienced an economic meltdown characterised by record hyperinflation, shortage of foreign currency, and weak economic fundamentals such as high unemployment and low productive capacity utilisation. However, since 2009 the economy has recorded modest growth averaging 6.4% per annum.

Zimbabwe is one of Sub-Saharan Africa’s most diversified economies with rich and diverse mineral endowments and favourable climatic conditions for agriculture. With a GDP of USD 28.4bn Zimbabwe has considerable unexploited potential to grow into an upper-middle class economy once the challenges it faces such as price and exchange rate instability, misallocation of productive resources, high informality, low investment, and limited structural transformation are addressed.

High and unsustainable debt arrears to international financial institutions (IFIs) limit Zimbabwe’s growth potential. It is encouraging to note that the Government of Zimbabwe is now taking steps to regularise its relationship with IFIs. To date, the government has prepared an Arrears Clearance, Debt Relief, and Restructuring Strategy, resumed token payments to IFIs and Paris Club creditors, and initiated a structured Dialogue Platform with creditors and development partners with the aim to agree on a program of economic, governance and land reforms.

Banking Sector Overview

Zimbabwe has a competitive banking sector, with 14 commercial banks, four building societies, and one savings bank. In addition, the Reserve Bank of Zimbabwe has licensed eight deposit-taking micro-finance institutions, 198 credit-only microfinance institutions, and four development finance institutions.

Research suggests that in 2022, the country had over 3.7 million bank account holders up from 2 million in 2014. In addition, there are 4.4 million mobile money users. Over 72% of all households have access to either a bank account or mobile money demonstrating high banking sector penetration rates. However, this presents opportunities for banking sector players to innovate and create relevant products and services that could see the country achieve universal access to banking services.

Notwithstanding the myriad challenges facing the economy, the Zimbabwean banking sector is well regulated with the Reserve Bank of Zimbabwe fulfilling its statutory obligation to formulate and implement monetary policy. The Central Bank also actively plays its supervisory function.

Historical Financial Performance

NMBZ has recorded an average ROAA of 7% since 2010. For the same period, ROAE has averaged 30% signifying the strong recovery of the group following the period of hyperinflation experienced in Zimbabwe before 2008. The average NPL ratio has been 2.8% demonstrating the bank’s conservatism and prudent lending practices.

Current Financial Performance

For the quarter ended 31 March 2023, NMBZ generated operating income of ZWL 15.9bn signifying a 613.63% increase from the ZWL 2bn recorded for the same period in the prior year. The strong performance is largely driven by increased transaction volumes, higher earning income-generating projects and modest loan book growth. Digitalisation continues to play a key role in NMBZ’s performance, an area in which the bank has built key competencies. Total assets grew by 32.66% from 31 December 2022 to 31 March 2023 funded by increases in credit lines and customer deposits.

During the same period, the bank witnessed customer deposits growth of 63.7% from ZWL 53.2bn as at 31 December 2022 to ZWL 87.1bn as at 31 March 2023. While the bank has realised an increase in business volumes and transactions, the growth is also reflective of the impact of the exchange rate on USD deposits. NMBZ continued to practice prudent lending focusing on quality assets, which has kept the NPL ratio at low levels of 1.43% (31 December 2022- 1.09%).

Development Impact

NMB Zimbabwe is a relatively small player in the Zimbabwean financial services sector, ranking 11th in assets, with a market share of 3.4%. Despite its relative size, NMBZ has seen a surge in onboarding mass retail customers (2020 – 354k, 2022 – 491k, a 39% increase) due, in part, to its innovative digital channel offering. It aims to grow this segment further through its recent partnership with the Zimbabwe Postal Service, where NMBZ will utilise the postal service branches as banking agencies.

The F&A sector is key to the economy of Zimbabwe, historically referred to as the ‘breadbasket of Africa’. Whilst its current F&A loan book is comparatively sizeable to the overall loan book at, 27%, NMBZ has set itself an ambitious objective of growing its F&A portfolio from USD 20mn to USD 100mn within three years to establish itself as the dominant agribusiness bank in Zimbabwe.