THE Reserve Bank of Zimbabwe (RBZ)’s new capitalisation requirements for banks leaves financial institutions with very little to invest in national programmes such as agricul
ture, Kingdom Financial Holdings Ltd (KFHL) chairman Richard Muirimi has said.
Addressing an analysts’ briefing on the six months to June 30 results this week, Muirimi urged the “regulatory authorities to look into the issue as it leaves banks only 40% of total banked funds available to banking institutions making it difficult to support reforms such as agriculture recovery.”
RBZ governor Gideon Gono’s December 2003 monetary policy statement requires banks to deposit $10 billion with the RBZ as paid-up capital by the end of this month as the central bank moves to address liquidity problems that rocked the financial sector early this year.
“Yes we want to support national projects such as agriculture but with 60% of our funds under RBZ management, we are left with less resources to use according to our discretion,” Muirimi said.
He said although it was necessary to channel more funds into the agricultural sector “until there is sustainable agricultural production that ensures food security, financial institutions were limited in their efforts to raise money for the national project due to the statutory requirements.” The requirements reduce banks capacity to support reforms as the resource base has been shrunk significantly, according to Muirimi given that banks were no longer allowed to depend on interest income as interest rates were now prescribed with the central bank calling on banks to lower rates in line with the “declining rate of inflation.”
“The central bank has directed banks to lower interest rates in line with the declining rate of inflation irrespective of the cost it takes to provide services and considering that we are left with only 40% to invest it may be difficult to make money going forward,” he said.
But, Muirimi said, KFHL had put in place strategies to complement the on-going restructuring programme to make up for the shift in policy. “Such strategies include rationalisation of the whole group, some units coming under one umbrella controlling unit and the suspension of the branch roll-out programmes. We hope these strategies would ensure that we perform much better than we did in the first half to June 30,” Muirimi said.