Banks step up lending

represented a loan-to-deposit ratio of about 81 percent. This was on the back of US$2,8 million in deposits, a senior Treasury official has said.
Secretary for Finance, Mr Willard Manungo, disclosed the statistics to delegates at the Institute of Bankers of Zimbabwe 42nd Winter Banking School in Nyanga yesterday.

He urged that banking institutions to be aggressive and to mobilise an additional US$2,5 billion, estimated to be circulating in the informal sector, for on-lending to industry.
For the period under review, the biggest chunk of the funds was channelled towards prioritised productive sectors – agriculture, manufacturing and distribution.

The Manufacturing sector received the biggest chunk, 20 percent, followed by agriculture with 19 percent.
The financial and investment sector did not benefit from these funds while conglomerates only received just one percent.

Mr Manungo said it was high time the financial sector mobilised local resources to fund industry on the back of the failure by the country to mobilise funding from the international community.
This has largely been a result of poor credit-worthiness.

The 2011 Winter Banking School has attracted more than 80 bankers from 22 banking institutions and about 10 chief executives and managing directors from the banks.
This year’s convention is running under the theme “Creating a Progressive Financial Services Environment Based on Trust, Accountability, Competence and Innovation”.

Mr Manungo said Government was, however, still concerned at the high lending rates, which are between 12 and 30 percent and the increasing non-performing loans.
It is understood 34 percent of loans have not been paid as of April this year.

“Zimbabwe needs to save for the growth of the economy and the banking sector has to come up with instruments to grow its deposit and lending base as we do not have control over external sources of funding,” said Mr Manungo.

On reducing country risk, Mr Manungo said Govern-ment’s priority was to address debt issues and strengthen the good relationships with the international community.
Zimbabwe owes the International Monetary Fund, World Bank, Africa Development Bank and other bilateral institutions over US$7,1 billion.

The banking sector, contributing about four percent to the GDP in 2010 and 2011, is estimated to employ 10 000 people and accounts for a significant contribution to the fiscus in terms of Pay-As-You-Earn, corporate tax and tax on interest.

But the structure of deposits remains short-term in nature, accounting for over 90 percent of total deposits.
The deposits remain concentrated in the four major banks, almost 62 percent of the deposits.

Mr Manungo said, notwithstanding the fast recovery and the positive contribution of the banking sector to the economy, the sector faced a number of challenges, which required collective efforts to manage.
“These challenges, among others, relate to bank capitalisation, high interest rates, increasing non-performing loans, absence of lender of last resort, limited inter-banking activities and low external domestic companies,” he said.

He added that a number of financial institutions remained under sanctions, thereby limiting their scope for obtaining external facilities for supporting domestic companies.
“Government, on its part, is committed to providing a conducive operating environment for the financial sector by ensuring macroeconomic stability underpinned by policies that are consistent, predictable, credible and clear.

“We are also committed to the full restoration of lender-of-last resort function and also finalise on the demonetisation process and the availability of small denominations,” he said.
IOBZ executive director Mr Sij Biyam said there was need to build confidence in the financial sector for the informal sector to embrace banking facilities.

On high interest rates, Mr Biyam said there was need for stability in deposits and confidence to bring down rates.
“Most bank deposits are transitory, making it very difficult to come up with lucrative interest on deposits, unless one deposits money for a period of about six months,” he said.