Financial Gazette (Harare)
Shame Makoshori
5 December 2011
ZIMBABWE’S banking sector is still struggling to lure back risk-averse depositors, despite an easing liquidity crunch on the domestic market that had been initially thought to be the major reason for shunning banks.
Finance Minister, Tendai Biti, last week said a majority of Zimbabwe’s population remains unbanked. He said established facts were that up until 2008, banks had combined bank accounts of about four million.
“The advent of the multiple currencies regime in 2009 reduced these accounts to about two million, translating into a ratio of one bank serving an average of 75 000 people,” Biti said.
He said mobile banking, which has been rolled out by several financial institutions, could provide an “opportunity to cater for the marginalised (and) unbanked section of our population”.
“In this regard, government will, in conjunction with the banking and retail sectors, continue to promote increased use of mobile banking facilities as well as plastic money,” said Biti.
Biti said the impetus for growth in the ailing banking system could be fortified in 2012 if deposits grew from the current US$3,3 billion to a projected US$3,8 billion.
Apparently, low deposit rates of about 0,2 percent per annum, which sharply contrast with exorbitant interests rates ranging between 15 percent and 30 percent charged on borrowings, had kept potential deposits outside the formal monetary system.
The Reserve Bank of Zimbabwe (RBZ) has described the high interest rates as “outrageous”, adding that they were only meant to oil the expensive lifestyles of bank chief executive officers who “get paid and live like angels”.
Confidence in the banking system hit rock bottom during the 2004/5 domestic financial crisis when at least 15 financial institutions were shut down as the central bank responded to rampant vice and speculation, which left account holders extremely exposed.
Economic analyst, Isaac Kwesu, said while market anomalies like parallel markets, which drove banks into the crisis, had been corrected under the prevailing monetary system, corporate governance deficiencies had emerged as a thorn in the flesh for the sector.
In a recent report, the Zimbabwe Economic Policy Analysis and Research Unit (ZEPARU) said until banks cleared the deteriorating confidence, they would dismally fail to attract significant funds locked outside the banking system.
“The banks still have a lot of work to do as it is estimated that about US$2,5 billion is circulating outside the formal banking system,” ZEPARU said.
“The nostalgia of the hyperinflation era and high bank charges for maintaining bank accounts continues to dampen the confidence of the banking public to deposit their money in banks.
“Despite a lot of misgivings from the public on reliance on the banking system for their savings, there have been some improvements in the extent to which the banks have been able to mobilise deposits,” said ZEPARU.
Biti said resolving the problem of an unbanked population depended on banks rebuilding consumer confidence, which had been worsened by government’s failure to decisively deal with the recapitalisation of the RBZ.
Last year, government injected US$7 million into the RBZ to enable it to resume its lender-of-last-resort role.
But the interbank market has remained weak.
Big banks have continued to avoid weak financial institutions to escape potential contagion should poorly capitalised players run into problems.
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