Analysis

  • Ipec approves Mimosa pension fund pre-2009 pension compensation scheme

    Staff Writer

    HARARE: The Insurance and Pensions Commission (IPEC) has approved Mimosa Pension Fund’s pre-2009 compensation scheme after it complied with all the requirements of Statutory Instrument 162 of 2023 (pre-2009 pension compensation regulations).

    In a statement, Ipec said the approval paves the way for the fund to commence the compensation exercise.

    “Once a compensation scheme is approved, the pension fund will directly communicate with eligible members regarding the payment modalities,” read the statement.

    Meanwhile, IPEC said it is working closely with other funds that are close to complying with the requirements of the compensation regulations, to facilitate their compliance, so that their compensation schemes can also be approved.

    “The Commission is in the process of instituting criminal proceedings against non-compliant entities in line with Statutory Instrument 162 of 2023,” reads part of the statement.

    Ipec in February this year said flagged insufficient disclosures in 2009 compensation actuarial reports saying it had noted inadequate disclosures in actuarial reports submitted as part of the 2009 compensation schemes.

    Ipec, in a circular seen by Inusrance24, said the inadequate disclosures were inhibiting the Commission from making an informed decision on the compensation schemes.

    “Following the submission of 2009 compensation schemes as required in terms of Statutory Instrument 162 of 2023, we have noted instances where the disclosures in the actuarial reports are not adequate to enable the Commission to make an informed decision on the compensation schemes.

    “It is against this background that the Commission requires that resubmissions or outstanding submissions make sufficient disclosures in the actuarial report as outlined in the Actuarial Society of Zimbabwe (ASZ) Guidance Note on S1 162 of 2023, released on January 25, 2024,” said Dr. Grace Muradzikwa, the IPEC commissioner, in a circular.

    In October 2023, Statutory Instrument 162 of 2023 (“SI162,2023”) was published. This focused on pensions and provident funds’ compensation for the loss of the pre-2009 value of pension benefits.

    The implementation of this Statutory Instrument proposed that Actuaries, who are mostly members of the Actuarial Society of Zimbabwe, assist in its implementation.

     

  • Pension-Backed Home Loans – Real Wealth Creation for the Real Owners of Capital?

    By Gandy Gandidzanwa and Itai Mukadira

    Most retirement fund members continue to struggle to secure housing finance despite having accumulated significant pension fund credits. Most are not able to buy residential properties, not only in the urban centres, but also even in the hometowns of the rural areas they retreat to at retirement.

    The general home loan market is characterized by a predominance of mortgage products with very high interest rates. The main players in this regard are profit-seeking building societies and commercial banks focused primarily in the middle to high income earning groups.

    A solution for the industry, by the industry, is now long overdue.

    Unique Real Wealth Creation

    Pension-backed home loans provide access to housing finance for members who would otherwise not be able to afford current market products, or not be considered for other reasons. This is an alternative form of housing finance where the loan is secured by a retirement fund member’s savings instead of a conventional mortgage bond.

    A pension-backed home loan scheme is a unique retirement fund investment solution where there is direct real wealth creation for the real owners of capital. Members enjoy the dual benefit of using their retirement savings to secure a home loan while still maintaining their retirement fund, allowing for the accumulation of home equity and pension growth simultaneously.

    As with any other housing finance, pension-backed home loans can be used for buying land, building on acquired properties, buying or renovating completed properties, and other such similar investments in real assets. The loan schemes can also be designed with a strong financial empowerment drive through the financing of developments of members’ properties that are established with income generation purposes in mind. Such developments would include, but are not limited to, borehole drilling, solar panels installation, irrigation system setting, boundary fencing, and others.

    Critical to note that members are not withdrawing from their retirement savings to finance the property purchase or developments. Their retirement savings remain invested in their pension funds and continue to grow. Thus, their retirement savings are preserved while they are accessing a facility from their pension fund for financing their dream home. As the pension fund remains intact and continues to grow with the pension fund’s investment strategy remaining uninterrupted, the member simultaneously benefits from the compounding growth of their retirement savings while also owning a home.

    Attractive Arrangements

    The loan is typically repaid over an agreed-upon period, usually limited to a member’s retirement age, with the understanding that the pension fund serves as a guarantee. This arrangement normally comes with potentially lower interest rates when compared to other forms of borrowing. It also is usually designed with no requirement to register a bond.  The application process is notably swift and efficient. Monthly repayments are seamlessly deducted from the member’s salary, enhancing convenience.

    The loans offer flexible repayment options with no early settlement penalties too. Unlike with conventional housing finance, members can make lump-sum payments and settle the loan much earlier and not be penalised for it. They can also be designed to accommodate variable monthly repayments to suit members’ financial situations.

    One of the long-known shortcomings of the pension fund industry is that members are either totally disengaged on matters of their retirement savings or are overly engaged for the most wrong reasons. Pension-backed home loans draw members to engage with their retirement savings in a responsible and meaningful way as they see the immediate and tangible benefits from their pension fund.

    Under a very difficult economic climate, Zimbabweans have shown unrivalled resilience and a deep determination to put a roof over their heads. The construction sector remains one of the most steadily growing sectors of our economy. A sizeable financial boost from the pension fund industry would go a very long way in helping many realise their dreams of owning a decent dwelling during their lifetime.

    Alternative Investment

    Looked at from the pension fund side, pension-backed home loans can be a smart consideration for a pension fund’s investment strategy. Mortgage loans can provide steady and predictable income streams from interest payments, which can contribute to the fund’s overall stability and predictability of returns.

    Including pension-backed home loans in the investment portfolio can diversify a pension fund’s holdings, reducing risk by spreading investments across different asset classes. Because the loans are backed by the member’s pension savings, the risk of default is lower compared to conventional loans, offering a safer investment.

    By allocating funds towards home loans, pension funds can diversify their portfolios and achieve the triple objective of earning attractive returns, within acceptable levels of risk, while simultaneously positively contributing to the social responsibility of putting a roof over their members’ heads.

    Wider Socio-Economic Benefits

    Beyond the immediate objectives that the schemes are designed to meet, they also have wider economic and societal benefits that they bring forth.

    The schemes promote financial inclusion. Members who otherwise would not have had access to or qualify for conventional loans due to limited credit history or income levels benefit from the schemes.

    Rolling out the schemes en-masse has the potential to bring back confidence and trust into the pension funds industry as it will be seen as, for the first time, deploying the industry’s capital to directly benefit retirement members in real and tangible ways.

    Housing affordability and ownership is a perennial headache for both society and the Government – pension-backed home loan schemes can offer a viable solution. By easing the upfront financial burden on homebuyers, the schemes make homeownership more attainable for middle- and low-income individuals and families.

    Industry-wide pension-backed home loan schemes will help minimise rural-to-urban migration by developing rural business centres and town councils thus upgrading their economies. Such a drive would directly be supportive of the Government’s rural industrialization agenda.

    The initiatives would also stimulate economic activity as increased homeownership fuels activity in various sectors. Home buying often comes with investing in property-related goods and services, such as furniture, appliances, renovations, and landscaping, which will boost local economies and create jobs.

    System Abuse Must Be Condemned   

    There are potential drawbacks though that members need to bear in mind. If poorly designed and irresponsibly used, there is the risk of members losing a portion of their pension. Also, if they default on their loans, it is possible that their retirement savings will be adversely impacted.

    Any attempts to be creative and design schemes that are not structured for financing property purchases and developments are likely to backfire and blow up in the hands of members. Such so called creative forms of lending, including via certain employer schemes, that are for non-residential property acquiring or developing purposes should be discouraged completely. Not only are they in conflict with the spirit of retirement savings they are also an outright violation of regulatory provisions.

    Similarly, arrangements with financial institutions where the pension fund advances a loan that is treated as a short-term money market investment, earning only money market type of returns, while members are made to borrow at exorbitantly high interest rates should be equally condemned. Same applies to arrangements where some building societies and commercial banks enter into debt arrangements with pension funds at comparatively low rates, have the debt sit on their balance sheets and then issue out loans to members at significantly high interest rates for their own accounts. Pension funds are not, and should never be used as, sources of cheap money for profiting from by these institutions.  

    Conclusion

    Pension-backed home loans can be a valuable tool for wealth creation for pension fund members, particularly in facilitating homeownership, which is a significant asset for many individuals. They can also be a strategic component of a pension fund’s investment strategy, offering stable returns and diversification from traditional asset classes.

     

     

     

  • Champions Insurance unveils a micro-insurance product

    Staff Writer

    HARARE: Champion Insurance has launched a micro-insurance product called “Bata Chamu,” a WhatsApp chatbot platform that enables users to interact seamlessly with its intelligent virtual assistants, providing instant access to affordable and tailor-made solutions.

    Through the platform, Champion Insurance’s prospective and existing clients will be able to buy vehicle insurance on WhatsApp.

    The platform will also include the purchase of various insurance products, including the hospital cash plan, medical aid, fire policy, funeral cover, personal accident cover, legal aid, and home insurance.

    Payment methods for these services will be made through Visa Card, EcoCash, Foreign Currency Accounts, and Zip It in both foreign and local currencies.

    The platform will also ensure an effortless registration process, streamline policy management, and allow instant customer assistance.
    Chamu will provide a 24-hour service, ensuring round-the-clock accessibility to customers.

    Bata Chamu can accommodate tremendous volumes of customer interaction, handling multiple clients without compromising turnaround times.

    It will also provide real-time assistance, thereby eliminating the need to wait for human assistance.

    The company said it felt the need to harness the power of technology and innovation to address prevalent challenges faced in communication networks.

    The company’s chief operating officer, Lovemore Madavo, said the development is expected to bring the convenience of instant communication, allowing clients to get quick answers to insurance queries, manage policies effortlessly, and file claims seamlessly, all within the familiar WhatsApp interface.

    He said one of the major challenges in insurance is that penetration levels are very low throughout the country.

    “It is a few people who get insurance or who have the reach of insurance, so our micro-insurance products are specifically designed to reach the underprivileged and cater for the needs of those who have been traditionally overlooked by the insurance industry.

    “We believe that the future of insurance is in SMEs and will be digitally driven. The future of insurance is for people who have never bought insurance before, but the major challenge is distribution, and we believe that the future is digital.

    “We have come up with this digital tool that is designed to make the customer experience pleasant and effective in reaching out to our clients.

    We believe that if we service our SMEs well, we will effectively contribute to the economy of the country,” he said.

    He noted that there will be no need for customers to constantly visit Champion Insurance Company’s service centres but to make use of the innovation.

    Champion Insurance is looking to onboard between 60,000 and 100,000 SMEs and more than 200,000 vehicles on the platform by the second half of 2024.

    Managing Director Sibongile Tsapo said, “Bata Chamu comes in with sophisticated artificial intelligence capabilities, which will help SMEs and the various small business owners to access, understand, and obtain insurance.

  • AIMZ joins the Pan African Fund Managers Association (PAFMA)

     

    Staff Writer

    The Association of Investment Managers of Zimbabwe (AIMZ) has joined the membership of the Pan African Fund Managers Association (PAFMA), an esteemed trade association dedicated to enhancing climate finance across the African continent.

    Since its landmark introduction at the Africa Climate Summit in 2023, PAFMA has rapidly grown, now boasting nine members representing 16 African countries and 231 fund managers, collectively overseeing assets under management (AUM) exceeding US$120 billion.

    The other new members are the Association of Moroccan Companies and Investment Funds (ASFIM), the Namibia Savings and Investment Association (NaSIA), and the Association des Societes de Gestion et de Patrimoine (ASGOP) de l’UEMOA.

    The Association of Investment Managers of Zimbabwe (AIMZ) has over the years evolved from being an industry lobby group to a driving force for the growth and development of capital markets in Zimbabwe and beyond.

    At the 2023 Asset Managers Convention held in South Africa, AIMZ began its regional foray with intensive engagements with capital market players and industry leaders from the region.

    PAFMA, in a statement, said Africa stands at a critical juncture, facing monumental financing gaps to achieve its Sustainable Development Goals (SDGs) by 2030.

    “With a staggering requirement of US$1.2 trillion, alongside an annual climate financing need nearing US$300 billion, the imperative for mobilising significant capital for development priorities has never been more pressing.”

    It was noted that PAFMA emerges as a beacon of hope in this landscape, spearheading efforts to bridge the chasm in climate finance through private sector initiatives.

    “Central to its mission is the promotion of alternative investments, with a strategic emphasis on green finance, heralded as a catalyst for propelling diverse sectors of the economy forward. By championing these alternative avenues, PAFMA envisages stimulating job creation and bolstering income generation across the continent,” reads the statement.

    In its endeavour to realise these ambitions, PAFMA is committed to pioneering localised research initiatives and fostering a knowledge-sharing culture and capacity-building among fund managers.

    It said the initiative aims to empower fund managers to assess and engage in investment opportunities within regions and countries where their presence was previously limited.

    Furthermore, PAFMA assumes the mantle of a proactive advocate, offering invaluable policy insights and championing the interests of its members in both regional and international forums.

    The association fosters a conducive environment for collaboration and networking among fund managers from diverse African landscapes, facilitating the exchange of ideas and best practices.

    “Simultaneously, as Africa witnesses a surge in domestic institutional capital, estimated between US$1 and 1.4 trillion, PAFMA recognises the untapped potential of harnessing local institutional capital to bolster the continent’s development agenda.

    “Unlocking this reservoir of private sector finance will complement constrained public finance, amplifying local currency financing and fortifying Africa’s journey towards sustainable development,” PAFMA said.

    PAFMA is a pioneering trade association uniting fund managers from across the African continent.

    Established in 2023 by five founding members—the Pension Fund Operators Association of Nigeria (PENOP), the Fund Managers Association (FMA) in Kenya, the Botswana Investment Professionals Society (BIPS), the Ghana Securities Industry Association (GSIA), and the Investment Management Association of Uganda (IMAU)—PAFMA is dedicated to bridging the climate finance gap through private sector initiatives, with a strategic focus on alternative investments and green finance.

     

     

  • ZB Financial Holdings insurance units profitable in 2023

    Staff Writer

    ZB Financial Holdings (ZBHF) says insurance service result for the year to December 31, 2023 fell by 486 percent from a deficit of $26,127 billion in 2022 to a deficit of $153,235 billion in 2023.

    This was largely as a result of an increase of 327 percent in insurance service expenses to $377,642 billion from $88,407 billion in 2022.

    The group in its financials said its insurance units were profitable during the year under review and their assets grew.

    ZB Reinsurance posted a profit after tax of $51,089 billion in 2023, up from $11,462 billion in 2022, and total assets increased in real terms to $182,335 billion from $60,205 billion in 2022.

    ZB Life Assurance posted a profit of $98,174 billion in 2023, up from a profit of $5,060 billion in 2022, while total assets increased in real terms to $279,765 billion from $135,421 billion in 2022.

    However, overall, the group said income continues to be mainly underpinned by fair value adjustments, other operating income, as well as commissions and fees.

    Total income for the year to December 31, 2023, rose 394 percent to $1,247 trillion, compared to $252,445 billion in 2022.

    “Income performance continued to be mainly underpinned by fair value adjustments, which rose by 530 percent from $74,443 billion in 2022 to $468,635 billion in 2023,” said Shepherd Fungura, the group’s chief executive.

    He said performance for the year was also supported by a 344 percent improvement in other operating income, from $107,200 billion in 2022 to $452,680 billion, as well as a 287 percent increase in commissions and fees, to $296,036 billion from $76,451 billion in 2022.

    The group’s financials also show that net interest income rose by 95 percent to $187,904 billion in 2023 from 96.144 billion in 2022, while loan impairment charges rose by 73 percent from a negative $32,762 billion in 2022 to a negative $56,627 billion in 2023.

    “Resultantly, net income from lending activities rose by 107 percent from $63,382 billion in 2022 to $131,277 billion in 2023,” said Fungura.

    Fungura said the group’s operating costs grew by 275 percent to $760,111 billion from $202,673 billion in 2022, largely reflecting the macro-level general price increases.

    As a result, profit after tax (PAT) for the year improved by 312 percent to $665,383 billion from $161,465 billion achieved in 2022.

    According to Fungura, the group’s total assets increased by 124 percent in real terms from $1,501 trillion as of December 31, 2022, to $3,355 trillion for the year under review, and the growth rate outperformed average inflation over the same period.

    He said deposits and other related funding account balances grew by 113 percent to $1,120 trillion from $524,796 billion as of December 31, 2022.

    Fungura said the group maintained a comfortable liquidity margin of safety, with the average ratio of liquid assets to customer deposits being above 60 percent throughout the year against a prescribed ratio of 30 percent.

    ZB Bank Limited posted a profit after tax of $366,751 billion in 2023, up from $68,464 billion in 2022.

    The bank’s total assets stood at $2,168 trillion as of December 31, 2023, up from $911,032 billion in 2022.

    The group’s building society, ZB Building Society, posted a profit after tax of $60,907 billion in 2023, up from a profit of $21,492 billion in 2022.