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Oliver Kazunga Senior Business Reporter
THE $100 million to kick start the interbank market availed by government will enhance banking sector confidence, economists said yesterday. Finance and Economic Development Minister Patrick Chinamasa at the weekend availed the facility that is expected to go a long way in arresting liquidity challenges affecting the economy.
The government engaged the regional lender — Africa-Export-Import Bank (Afreximbank) — to assist in developing a solution that would ensure convergence and reintegration of the banking system through restoration of a healthy interbank market.
An economist Bradwell Mhonderwa hailed the government for introducing the interbank market saying the gesture would go a long way in boosting investor confidence in the local financial services market.
“It is a positive move that we now have such a facility coming into the economy.
“The banking sector confidence will now be built and operating without it was detrimental to operations of banks. The minister also announced that the facility will also be accessed by banks that are liquid enough which is also good for the sector,” he said.
Speaking at the launch Minister Chinamasa said the facility was short term (two years) and available only to solvent and healthy banks not facing fundamental challenges of solvency or viability.
“It is intended to create a one-tier banking market in Zimbabwe and to promote interbank dealings among all banks in the Zimbabwean economy. It shall be structured as a “collateral swap” whereby Afreximbank will use own name securities to participating banks in exchange for collateral or securities presented by the participating banks and acceptable to Afreximbank,” he said.
“The participating banks may pledge the securities for interbank borrowings. The securities may be presented to the bank for encashment at any time; the issued securities shall be accorded liquid asset status by the applicable authorities as well as promoting inter-bank dealings among all banks in the Zimbabwean economy.”
Zimbabwe National Chamber of Commerce chief economist Kipson Gundani echoed similar sentiments adding that the majority of banks in the country do not have the collateral to be accepted by Afreximbank and government was coming in as a guarantor.
He said the requirement that participating banks may be asked to pledge securities for interbank borrowings was a normal banking norm.
“And because the securities may be presented to Afreximbank is meant to allow the asset to be very much bankable,” he said.
Another economist Innocent Masauti however, said although government was coming in as a guarantor, a number of institutions would find it hard to access the facility.
“The introduction of the interbank market is a positive gesture, which in essence will oil financial intermediation in the economy to eliminate distress and failures by banks.
“However, many banks will find it hard to access that facility because Afreximbank is demanding very liquid securities. The fact that government is coming in as a guarantor does not mean that it will provide 100 percent securities.
“Each bank will be expected to provide its own securities against the funds that it requires as a result most banks would be caught in a situation whereby they require the funds but they have inadequate securities that are of less prescribed quality than is required by Afreximbank,” he said.
He said $100 million was not enough for the economy with a deposit base of $4 billion but the facility would impact positively on providing immediate financial support within the inter-bank market.
The interbank market was suspended following the adoption of a multicurrency system in February 2009 that triggered the liquidity crunch in the economy.
The tight liquidity situation was also as a result of a number of reasons among them, Zimbabwe’s precarious Balance of Payment position.
The situation has also been compounded by the central bank’s inability to provide liquidity support to local financial institutions in dire need of assistance.
Online Reporter