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Mernat Mafirakurewa Business Editor
The local banking sector is set to benefit from foreign investors keen to expand their footprint on the African continent, a local research firm has said.In its Banking Sector Survey for 2013, MMC Capital said the banking landscape in Africa remains attractive and the Net Interest Margins that were earned across the continent last year reflect continuing benefits from good advances growth.
A number of foreign investors have of late increased their interest in local banks as they sought to fortify their balance sheets.
In 2012, the central bank raised minimum capital requirements for commercial and merchant banks from $12,5 million and $10 million respectively to $100 million.
Last month Atlas Mara Co-Envest — a partnership between Africa’s youngest billionaire Ashish Thakkar and former Barclays chief Bob Diamond — announced plans to acquire BancABC for $265 million.
Mauritius-based AfrAsia Holdings Limited (AfrAsia) last year snapped up a significant stake in the then Kingdom Bank.
“By virtue that Zimbabwe is a player on the African landscape, opportunities exist for local banks who are seeking to regularise their regulatory capital base levels.
“In the short to medium term, we are likely to see more of foreign partners coming on board in Zimbabwe as banks with Pan African vision spread their wings.
“The emerging undercurrent of a softer stance by government on indigenisation requirementsfor the banking sector augurs well with the sector’s efforts to source fresh capital injections.
“As reflected by the HHI, the flight to quality will also force banks with lower capital bases to intensify their efforts in securing additional funding.”
MMC however said banks would continue with their cost containment strategies and investment in Information Technology systems to facilitate the customer value proposition and ensure that a stable platform is created for future expansion.
Technology, MMC said, continued to revolutionise banking across the globe, leading to cheaper and efficient products and services especially those that are mobile based.
“This means that those banks concentrating on the old brick and mortar model will fast lose their relevancy in the market.
“The positive note from these initiatives (such as EcoCash Save) in countries such as Zimbabwe relate to deposit mobilisation back into the formal banking system from the unbanked population,” said MMC.
It is estimated that the informal sector currently contributes 60-70 percent of Zimbabwe’s Gross Domestic Product and on the other hand 18 percent have access to financial services.
“With the liquidity squeeze persisting in the economy, forcing many companies either to close shop or scale down operations, the informal sector continues to grow.
“On the back of its liberal registration process, EcoCash Save would be key in luring the non-banked society to bank hence mopping up deposits back into the formal sector,” the broking firm added.
“The sad part though is that this mobile money platform has the potential to trim the industry’s profits in the short term as potential and existing depositors discard the old banking belief of a client getting value from walking into the banking hall in order to transact, but use the mobile money platforms which are convenient.”
MMC said worsening Non-performing Loans (NPL) position continues to be an albatross around the banking sector’s neck and the result has been reduced lending to the economy which has further worsened the NPLs situation.
As the local economic activity slides further, MMC said industry NPL ratio would continue to rise as borrowers fail to repay while reduced lending was disastrous to an economy as key productive sectors would starve from working capital.
Online Reporter