MICRO lender, InnBucks Microbank Limited (InnBucks), is using investment securities from 20-year zero-rated coupons of US$5 million as collateral to fund its operations, it has been revealed.
A zero-coupon is a debt security instrument that does not pay interest.
InnBucks has grown as one of the preferred digital payment platforms in the country through its partnership with fast food firm, Simbisa Brands Limited, by offering its services at the latter’s outlets.
Simbisa has a 35% stake in InnBucks, through its subsidiary, InnBucks Private Limited.
InnBucks chairman Ralph Watungwa said the firm’s investment in technology would continue to be the core focus of its strategy to deliver financial services.
“The micro-bank holds investment securities relating to twenty year zero rated coupons of US$5 million with the Reserve Bank of Zimbabwe. The instruments are carried at face value in the financial statements,” Watungwa said in a statement.
“No impairment has been recognised on the instruments as the micro-bank believes that the face value represents adequate economic benefits.
“In particular, the instruments are applied as collateral towards funding lines which in turn generate significant net interest income that neutralises its zero-coupon status.”
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He said the micro-bank undertook its transactions in various currencies per the multicurrency system in Zimbabwe.
InnBucks has determined the functional currency as the United States dollar.
“Regulatory expectations include reporting financial statements on the basis of IAS 29 “Financial Reporting in Hyperinflationary Economies”, which requires restatement of transactions and balances at period end in contravention of the requirements of IAS 29 paragraph 1, which states that IAS 29 shall be applied to the financial statements of an entity whose functional currency is the currency of a hyperinflationary economy,” Watungwa said.
InnBucks’ core capital position closed last year at $45,21 billion translating to US$7,41 million, which is above the current minimum regulatory requirement of Zimbabwe dollar equivalent of US$5 million.
However, the Zimbabwe dollar has since been scrapped for Zimbabwe Gold (ZiG) currency.
“This is mainly due to both the organic growth of the business and the funded income generated through various sources of funding including central bank support, offshore borrowings and fixed term deposits which were mobilised over the period,” Watungwa said.
“Various headwinds are observed with the potential impact to affect the micro-bank’s capital, but the micro-bank continues to initiate various initiates to preserve the capital including but not limited to hedging and effective security perfection on our exposures to clients.”
InnBucks chief executive officer Daisy Zinyemba said the company had positioned itself in a manner that ensured business continuity.
“The micro bank continues to rollout various products as part of its strategic focus. Electricity sales, nano loans, and exciting customer loyalty products are some of the services earmarked for the second half of 2024 financial year,” she said.
“InnBucks’ remains committed to providing innovative products and services.
“The microbank has partnered with several key stakeholders to ensure that the needs of the diversified clientele base are met.
“Loans, payroll processing, structured finance, international banking and the wallet services are some of the products being offered by the micro-bank.”
InnBucks reported a $41.25 billion profit after tax during the six-month period ended December 31, 2023, a strong 263,46% increase in performance compared to the 2022 comparative.
This was because of the micro lender’s business model potential and the ability to adapt to the challenging and versatile economic environment.
The model includes increasing customer activity within the micro bank, growing a profitable lending book, driving domestic and international remittances, significant leverage on technology, and driving structured finance.
The micro lender is also working on improving internal processes, compliance and risk management elements.
