The Sunday Mail
Africa Moyo —
FINANCE and Economic Development Minister Patrick Chinamasa says the banking sector continues to stabilise following the freeing of bank’s balance sheet by the Zimbabwe Asset Management Company (Zamco).
Zamco is a special purpose vehicle created by the Reserve Bank of Zimbabwe in 2014 as part of all-inclusive measures to deal with the scourge of rising non-performing loans in the banking sector.
As at November 30, 2016, Zamco had acquired NPLs totalling US$543 million, which has given breathing space to banks and other companies, especially those that are courting investors.
Presenting the 2017 National Budget last week, Minister Chinamasa said: “The banking sector continues to show signs of recovery and stability following the hiving off of non-performing loans to Zamco, and remains adequately capitalised with average capital adequacy and tier 1 ratios of 23,7 percent and 20,6 percent as at end of September 2016, respectively”.
The banking sector’s aggregate core capital increased from US$0,9 billion as at end of September last year to US$1,1 billion in September 2016, a move that restores confidence in the banking sector.
Non-performing loans had presented vulnerabilities related to quality of capitalisation, particularly against the background of the adverse effects of challenges posed by liquidity and cash shortages.
As confidence in the banking sector rebuilds, there is a continued upward trend in both deposits and domestic credit. Total banking sector deposits went up by 11,4 percent to US$6,1 billion by 30 September 2016.
Last year, banking sector deposits were US$5,6 billion. There have been concerns by depositors that financial institutions were in the red due to their inability to pay depositors their dues on demand.
Long queues have become a permanent feature at banks across the country due to cash shortages, and banks have imposed withdrawal limits of between US$40 and US$100 to be able to service most of their customers.
Analysts expect the cash queues to subside in the near future as the central bank continues to issue bond notes into circulation.
Since bond notes were introduced on November 28, the Reserve Bank of Zimbabwe has issued US$17 million out of the US$200 million facility which is backed by the Africa Export-Import Bank (Afreximbank).
The RBZ is deliberately issuing the bond notes bit by bit to avoid chances for arbitrage. Minister Chinamasa also said similar growth was experienced in domestic credit which grew by 16 percent to US$5,8 billion over the same period up to September 30, 2016.
He added that the issue of 15 percent lending rates from banks, coupled with shorter lending periods, continues to negatively impact on the competitiveness of borrower businesses.
“. . . the Reserve Bank will continue to monitor the levels of lending rates being charged by banking institutions through their on-going supervisory activities in liaison with the Bankers Association of Zimbabwe,” said Minister Chinamasa.
In August last year, the RBZ said it had reached an agreement with banks to cap interest rates at 18 percent, in a move that brought relief to the borrowing public and corporates. The minimum interest rate was put at 8 percent.
The lending rates took effect from October 1, 2015.
The review of bank charges and interest rates was meant to stimulate aggregate demand and promote the revival of industry, as well as reduce the cost of doing business.
Industry had complained that the interest rates of between 15 percent and 35 percent offered by banks were punitive and designed to ensure that companies and individuals failed so that financial institutions sold their collateral.
Meanwhile, Minister Chinamasa said a National Financial Literacy Strategy would be unveiled in 2017, which will pave way for the implementation of tailored financial literacy programmes aimed at increasing financial capability levels among the various population groups in the country.
He said there will be need to embed financial literacy in the country’s education system. Financial literacy is one of the pillars of the National Financial Inclusion Strategy, which is key in ensuring that financial inclusion initiatives result in the desired positive impact on economic growth and development.
