malvernmugadzikwa
Latipha Mapfumo
The low saving rates obtaining in the country are a cause for concern and if they persist, could lead to much lower investment rates and old age poverty, economists have said.
Early this week, the Reserve Bank of Zimbabwe launched the National Financial Inclusion Strategy II (NFIS-II) to achieve the aspirations of the National Development Strategy 1 (NDS1).
Among other things, NFIS-II is meant to increase the level of savings in the economy, which has been declining over the years.
According to NFIS-II savings uptake in the country has been declining from 47 percent of adults who were saving in 2014, down to 36 percent in 2022.
In monetary terms, the saving averaged USD130 per month reflecting the general poverty levels among some Zimbabweans, reads part of NFIS-II.
The strategy paper also revealed that savings both with the banks and other formal non-bank financial institutions, have declined from 10 percent in 2014, to 5 percent and 7 percent respectively, with 64 percent of the adult population not saving at all, an increase from 53 percent in 2014.
Only 13 percent of MSMEs use banking and other formal channels for saving, which represents a 7 percentage points decline from 20 percent in 2014, reads part of NFIS-II.
Low awareness of financial products and a lack of disposable income were identified as major barriers to savings and investments in the formal financial services sector.
Dr Prosper Chitambarawe, an economist, described Zimbabwe as a “dissaving nation”.
“We are highly consumption-oriented and consumption-driven. Ideally, you need to be saving 30 percent of your GDP, and investing again 30 percent of your GDP in order to sustain development and inclusive growth”.
He added, “high levels of poverty have a negative effect on savings and on investments.”
Chitambara, however, blamed the low saving rates on the lack of confidence in the financial system.
“This has discouraged a lot of people from formally banking their monies. This results in savings done informally,” he said.
Another analyst, Farai Mutambanengwe, said people were not saving because of inflation.
“Any money that’s put in the bank it’s going to be inflated away, there is no interest that is being paid on deposits so again there is no incentive to save and high bank charges.
“Anyone with excess money keeps it at home rather than put it in a bank,” Mutambanengwe said.
Denford Mutashu said saving is a key indicator of the public’s trust in the financial system and policy environment.
“Confidence is derived from predictability and consistency. The losses experienced when the Government unpredictably converted USD savings to local currency back then affected the savings culture.
“Low disposable incomes and poverty are also contributing factors to our environment. Confidence restoration in the banking sector should remain a continuous process,” Mutashu said.
People now resort to other savings cultures like rotating savings and credit association (ROSCA) also known as Mikando and piggy bank savings known as Gaba rounds.
Although it is not safe, as they can be robbed of all their hard-earned money, people still prefer keeping their money at home.
“People lack financial knowledge on how to save and where to save regardless of the Zimbabwean economy”, said Gladys Shumbambiri.
Bongani Ndlovu