THE Association of Building Societies of Zimbabwe says although the numbers of accounts have not increased dram
atically, the monetary value of mortgages has increased relatively significantly, indicating that larger individual mortgages are being given due to the escalating costs in house purchases.
In its latest report for member societies for the period ending June 30 the association, whose president then was Intermarket Holdings Ltd chief executive officer Nicholas Vingirai, said this underlines the problems for building societies to materially increase the number of clients who could avail themselves to mortgages.
It said this was having an even greater negative impact on the high density home owners in particular which show a decrease in the number of mortgage accounts during the period.
The association of building soci-eties comprises of Intermarket, Beverley, the Central Africa Build-ing Society and the Zimbabwe Building Society.
First National Building Society was not included in the figures and information used in the report because it is currently under curatorship.
The information was also compi-led before Vingirai was ousted from Intermarket and before the institution was shut down and put under curatorship by the Reserve Bank of Zimbabwe (RBZ) after serious liquidity problems were unearthed.
Vingirai has since fled the country and is now in the United Kingdom.
The association said another effect of mortgages was that it noted that in comparison with other financial institutions, building societies were losing the deposit market share because of the fact that, by subsidising mortgage rates, they are forced to offer depositors’ returns which are significantly lower than investments in other sectors.
“It is becoming increasingly difficult for building societies to attract meaningful deposits where their interest rates are much lower than the average in the financial sector,” the association said.
The Zimbabwean economy has continued to decline and inflation had risen by the financial year-end 2003 to nearly 400%.
Interest rate levels then were well below inflation and the increased costs resulting from high inflation made operations in the financial sector extremely difficult.
During the financial year ended June 2003 the combined assets of the building societies measured in historical cost terms grew by 162%.
Cash and investments grew by 168% and mortgage advances by 95% from $17,1 billion to $33,4 billion.
The association said deposits grew by nearly 180% from $39,9 billion to $111,2 billion and shareholders’ equity, which consists mostly of permanent, paid up shares by $31,1 billion.
“Obviously the increase in cash and investments has been due by and large to inflation and we have seen the effects of the cash crisis that was experienced in the last few months,” the report said. “Of more concern is the increase in mortgage advances which does not appear to have kept in line with inflation and is largely due to house prices out-stripping income earner’s ability to afford meaningful loans.”
The association said many pro-perty transfers were a result ofexternal funding raised by Zimba-bweans presently outside the country and making provision for their future in the country.
The association said the mortgage statistics revealed some interesting facts.
The number of mortgage accounts in June 2001 was in the region of 63 000.
At the end of June 2003 this had grown to approximately 65 500, a paltry 4% increase.
“Evidently, this is not a significant increase and in fact, in June 2002 this had decreased to some 60 000 accounts,” the association said. “The portfolio balance by monetary value at the end of the financial year 2001 amounted to $10,2 billion and by the end of the financial year to June 2003 the figure had further increased materially to $33,4 billion.
“The point to be noted is that although the numbers of accounts have not increased dramatically, the monetary value of the mortgages has increased relatively significantly, indicating that larger individual mortgages are being given due to the escalating costs in house purchases,” the association said.