Banks cut back on lending

Zimbabwean banks routinely sit on more than US$1 billion in Real Time Gross Settlement balances every day as they are now increasingly reluctant to lend to both individual and corporate clients, the Reserve Bank of Zimbabwe has said.

Notwithstanding the take up of non-performing loans (NPLs) by the Zimbabwe Asset Management Company (Zamco) – a special purpose vehicle created by the central bank to take over toxic assets from qualifying banks – souring loans stood at 15 percent at the end of the first quarter of 2016.

NPLs of less than five percent are considered to be ideal for any economy.

RBZ deputy director (international banking and portfolio management) Mr Ernest Matiza said banks had become risk averse because of the high levels of default.

“We have seen a culture of not paying (back) obtaining in our economy. If you look at the RTGS balances of banks which sleep over at the Reserve Bank, there is over half a billion, in some cases close to US$1 billion, money sleeping at the Reserve Bank.

“We have seen banks not going out to lend; why? Because there is a culture of going out to borrow and not repaying,” said Mr Matiza.

Zamco has to date acquired bad loans worth US$383 million.

However, NPLs are expected to drop once a Credit Reference Bureau (CRB) has been set up. The central bank has engaged a private firm to set up the CRB at an estimated cost of US$1,8 million.

The CRB, whose databank will be housed at the Reserve Bank, is expected to help in consolidating credit risk management in the banking sector and reduce indebtedness by borrowers.

All banking institutions and microfinance institutions would be required to avail credit information – positive and negative – to the databank.

Mr Matiza said the RBZ continued to engage banks to promote the use of plastic money.

“There is still a challenge in terms of infrastructure and we want to see serious investment going into infrastructure. In terms of point of sale machines, we are targeting the main retail outlets.

“We want to see a quick response in the big shops and even at growth points. At the moment we have taken plastic money to the rural areas through mobile money – EcoCash, TeleCash and One Wallet. We are also engaging the mobile money service providers so that they reduce charges,” said Mr Matiza.

Telecel recently slashed its tariff regime for mobile money services.

Bill payments using TeleCash have been reduced from US$3,70 to US$1,50, while bill payments that cost less than US$5 have been zero-rated.

Gold debit card charges have been reduced from US$2,95 to USc45 and card transactions of US$2 and below are now free.

EcoCash, Econet’s mobile money service, had also zero-rated some payments made via EcoCash.