TOTAL deposits in the banking sector, comprising demand, time, saving deposits and export foreign currency accounts as at March 31 2009 amounted to US$262,9 million, official figures showed this week.
This is said to be low for an economy which according to the Confederation of Zimbabwe Industries has an insatiable appetite for working capital.
Analysts said the deposits were very low as they could not be loaned to companies and individuals for working capital requirements.
â€œWorking capital to revive industries is very scarce,â€ an economic analyst said on Tuesday.
â€œOf the US$262,9 million, not all of it can be loaned. Some of it is short-term, that is seven or 14- day deposits. There is still a confidence problem as people withdraw all their salaries once they reflect in their accounts,â€ the analyst said.
â€œHow much is loaned also depends on the risk appetite of a bank as determined by its policies. For example, a bank could just loan 15% of its deposits,â€ he said.
â€œGiven the pathetic thresholds of money in the market, no one can lend long-term. It has to be loans with a very short working cycle, such as 30 and 60 days at most,â€ a banker said this week.
Banks interviewed by businessdigest this week said there were no deposits in the market. They said they were competing for the â€œfew depositsâ€ available. Individuals and companies are not depositing because they do not have a lot of disposable reserves. The few depositors that have money are said to be expensive, offering it to banks on a â€œtake-it-or-leave-itâ€ basis.
â€œBanks are not giving out money because there is no money to lend,â€ an analyst said.
Bankers said the bulk of the money was provided short-term by depositors who dictate their price.
A client can bring $10 000 and demand 3% interest flat. The banker has to look at who wants to borrow that money for the same period at an interest margin which is higher. Such a deposit, technically called a liability, should have a matching asset, meaning that the loan must be matched with the deposit in terms of tenor.
Given that there is too little money available for lending, it becomes expensive.
â€œItâ€™s a case of demand and supply. One has to pay more for the little (money) which is available. With time, the price of money will come down. Also, long-term money in the form of credit lines will reduce the cost of money,â€ an analyst told businessdigest.
Economist Brains Muchemwa said: â€œWhatever happens however, banks in Zimbabwe at present are not losing capital in buying Treasury Bills (TBs) as was the case over the last decade.
â€œAs the capital positions of banks strengthen gradually as more inflows from abroad bolster their lending capacity, the cost of capital will begin to soften and bring relief to many Zimbabwean producers who are battling with competitiveness against producers in South Africa, who are enjoying favourable borrowing terms for working capital.â€
Muchemwa said the recovery of the Zimbabwean economy could take up to five years without sufficient capital, skills and favourable commodity prices.
â€œThe positive side is that the recovery has started and what is key is to manage the process in a transparent manner,â€ he said.
BY PAUL NYAKAZEYA