Zimbabwean banks deposited a total of US$126 million as surplus as at July 31 this year as the liquidity situation in the sector improves, Reserve Bank of Zimbabwe (RBZ) deputy governor Kupukile Mlambo has said.
BY TARISAI MANDIZHA recently in Grand Hyatt, Dubai
Speaking on the sidelines of the Institute of Chartered Accountancy of Zimbabwe (Icaz) Winter School at the Grand Hyatt in Dubai, Mlambo said the deposits would be guaranteed under the Afreximbank US$100 million and will enable banks to borrow funds at lower rates.
“Right now private sources of financing are constrained by low savings and lack of cheap and long-term capital,” he said.
Mlambo said there was need to grow long term deposits.
“… Of the US$5,6 billion deposits recorded as at end of June 2015, about US$3,1 billion was in the form of demand deposits, which were relatively short-term in nature, thus constraining the capacity of the banking sector to meet long-term funding requirements,” he said.
The current corporate lending in Zimbabwe ranges between 9% and 29% while the default penalties range between 19% and 43,5%, Mlambo said.
According to the recent Monetary Policy Statement, RBZ and the Bankers Association of Zimbabwe have agreed on guidelines for lending rates were lending to the productive sectors for prime borrowers with low credit risk will have interest rates set at between 6% and 10% per annum. Under the new terms, effective October 1, 2015 for both existing and new borrowers, those with moderate credit risk will access loans at rates between 10% and 12% per annum, while borrowers with high credit risk will get loans at between 12% and 18% interest per annum.
Interest rates on housing finance will be pegged at between 8% and 16% per annum while default rate on consumptive lending of between 3% and 8% will be charged above the initial interest rate to the borrower.
Mlambo however said the RBZ has been taking pre-emptive and corrective measures to ensure that the financial sector remains safe and sound. “In this regard, a huge milestone has been archived in the country’s banking and financial sector. The RBZ Debt Assumption Bill has been signed into law; all the banks have surpassed the US$25 million threshold and are now adequately capitalised,” said Mlambo.
“We have taken decisive action on weak, distressed and troubled banking institutions and closed those that were not viable. We have established the Zamco (Zimbabwe Asset Management Company) to deal with NPLS (non-performing loans) in the banking system which had creeped to unsustainable levels of around 25%, created the credit reference system which will help prevent further build-up of NPLs.”
He said resuscitation of the interbank market and mechanisms for secondary trading have greatly improved liquidity in the economy, while the introduction of bond coins to buttress the multiple currency system also helped prices to correct themselves downward.
These measures, together with demonetisation of the Zimbabwean dollar, have resulted in a much more sound and stable banking system capable of mobilising long-term funding to finance economic recovery and growth.
“At the same time the bank is working with all the relevant stakeholders and government to create an active bond market. Deep and liquid bond markets are essential for a country to enter a sustained phases of development, driven by market determined capital allocation. This will give avenues for the likes of Old Mutual and Nssa to actively finance Zimbabwe’s economic recovery,” Mlambo added.