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which are currently averaging 5 percent.
Regional bankers, the African Development Bank, this week said the mismatch is high and unfavourable for both depositors and borrowers and thus militates against deposit mobilisation and investment promotion initiatives.
“The prevailing lending rates are influenced by persistent liquidity shortages, limited inter-bank lending and stringent collateral requirements for accessing the lender of the last resort (LOLR) facility, among other factors,” said AfDB in its report on Zimbabwe for August.
Acceptable collateral requirements for accessing the LOLR facility include a Deed of Transfer on immovable property.
Bank deposit and savings interest rates average 8,7 and 1,9 percent per annum.
Lending rates, however, average 26,8 percent per annum, representing a wide interest rate spread.
According to the Mid-term Monetary Policy Review Statement issued by central bank governor Dr Gideon Gono, the country’s financial sector disbursed about US$2,3 billion into the private sector and
40 percent of the funds went to the non-productive sector.
Total bank deposits held by banks grew to US$2,8 billion in June 2011.
The structure of deposits remains short term in nature, accounting for over 90 percent of total deposits and deposits remain concentrated in the four major banks, accounting for 62 percent of the deposits.
To increase funding to the productive sectors of the economy banks have been encouraged 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.
AfDB added that banks that failed to meet the minimum capital requirements might face increasing challenges in borrowing on the inter-bank market, given that other banks would not want to be exposed to them.
Ideally, lending rates should be linked to inflation in a manner that results in positive real rates, as well as taking into account specific premium of different borrowers.
With the sustained decline in annual inflation, from above 6 percent in May 2010 to 3,3 percent by July 2011 it was expected that banks would reduce lending rates to reflect positive gains on one of the key factors in the determination of interest rates.
Dr Gono said interest rates are supposed to go down particularly in view of the stability in the financial sector.
“In order for the economy to benefit from low inflation and reduction in risk factors brought about by stability in the financial sector, the central bank continues to impress upon banks to ensure that their lending rates are linked to inflation,” said Dr Gono in his recent monetary policy statement.
However, the central bank chief said he had no intention of legislating interest rate levels in the economy or “for that matter, reintroduce interest rate controls”.
Online Reporter