HomeBusiness DigestZim still over-banked'

Zim still over-banked’

Shakeman Mugari

ZIMBABWE is currently over-banked and there is need to drastically reduce the number of financial institutions if stability is to be restored, said prominent economic commentator Eric Bloch t

his week.

Bloch said Zimbabwe with its small population only required a minimum of five and a maximum of 10 banks.

“We have too many banks in Zimbabwe and the number would have to reduce drastically,” Bloch said.

Zimbabwe currently has more than 40 financial institutions, a situation which analysts say is not ideal for the small and fragile economy.

The country has 16 commercial banks, six merchant banks and five building societies. There are nine discount houses and five finance houses.

The banks are scrambling for about 15% of Zimbabwe’s population that is economically active and potential account holders. The 16 commercial banks are all competing for a shrinking market of about two million potential depositors whose savings are already under threat from inflation, said Bloch.

“Countries that are many times bigger than Zimbabwe have got fewer banks. So this country is over-banked.”

He said the number would have to be reduced by mergers, which have to be undertaken now if the some banks are to survive. “It is incontrovertible that some weaker banks would have to sink and those with the hope to survive will have to merge – that is the only way out,” Bloch said.

He added that there were still some undercapitalised banks squatting in the market. “Although some banks are solid it must be realised that there are some that are still very fragile and undercapitalised,” said Bloch.

The International Monetary Fund team that visited the country earlier this year said Zimbabwe only needed a maximum of seven banks. Meanwhile, tremors in the financial sector continued this week with a number of indigenous banks reportedly being hit by capital flight and panic withdrawals as depositors took their cue from Trust Bank which was abruptly placed under curatorship last week.

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