RBZ moves to control interest rates

BANKERS and economic experts have lauded the Reserve Bank of Zimbabwe (RBZ)’s mooted regulations to control lending and interest rates, saying the move will foster financial inclusion and promote economic growth.

Report By Clive Mphambela

Speaking to businessdigest this week Bankers’ Association of Zimbabwe (Baz) president George Guvamatanga said the RBZ initiative was welcome and not unique to the country.

“Outside of the fact that banks are commercial entities, they have a significant socio-economic responsibility to influence and assist the growth of the economy. As bankers, we cannot and have never shied away from that responsibility,” Guvamatanga said.

He said the framework RBZ was working on was all-inclusive and would involve a lot of dialogue between all key stakeholders.

“We will use an evidence-based approach to come up with an appropriate mechanism aimed at addressing information asymmetries existing in the SME (small and medium-scale enterprises) sector that slow down banks in lending to SMEs,” he said.

Prominent economist Eric Bloch said the move by the RBZ and government was overdue.

“I fully support the idea. SMEs are critical in the economy and they need to be supported. That is the reason why the Small Enterprises Development Corporation (Sedco) was formed.

Government has not been able to properly capacitate Sedco and coming up with another practical way of achieving the same objective is a good development,” he said.

However, Bloch warned the new regulations must not exert pressure that force banks to lend to otherwise unsound SMEs.

“That could potentially distabilise the banks by eroding confidence in the banking sector,” he said.

Chartered financial analyst and head of research at MMC Capital, Itai Chirume, said “first and foremost, any perceived pricing distortions in the economy as well as any perceptions that certain businesses are favoured by lenders only speak of two structural problems in the economy.

Banks are speaking to a risky credit environment, hence lending rates are high to price in the risk”.

“Secondly, there is a critical liquidity challenge. There is simply not enough money so there are demand and supply factors also in the equation. You cannot solve either or both problems by directing lending through statutory means,” Chirume said.

He warned that in the absence of evidence that banks were deliberately and maliciously denying credit to certain borrowers, market forces should be allowed to dictate the quantum of lending to each of their customer classes.

“Banks are commercial entities who will ultimately lend to anyone with a good proposal and an acceptable risk profile.

Some of the issues require there first be a credit bureau that will enable banks to accurately assess the profile of SMEs before they can make informed decisions.

“Secondly, the level of credit created must match the level of production in the economy otherwise the whole move may result in a distabilisation of the banking system,” Chirume added.