Manufacturing gets lion’s share of bank credit

total credit to the private sector increased by 84,3 percent from US$1,6 billion in November 2010 to US$2,9 billion in November last year.
Loans and advances were largely channelled towards manufacturing (18 percent), distribution (17 percent), agriculture (16 percent), communication (16 percent), services (15 percent), individuals (15 percent) and mining (6,4 percent).
As a result of the growth in the deposit base and expanded credit, the loan to deposit ratio (excluding offshore lines of credit) increased from 61,9 percent in December 2010 to over 71,7 percent by end of last year.
Including the offshore credit lines the loan to deposit ratio for December 2011 was over 87 percent.
Reserve Bank of Zimbabwe Governor Dr Gideon Gono, however, said the growth in credit to the private sector still falls short of broader national requirements.
“This development though promotive of private sector led growth still falls short of credit required to support fast-paced economic growth that meaningfully creates jobs and uplift the general standards of living for the generality of Zimbabweans,” he said.
The inadequate levels of lending particularly relate to the level of liquidity in
the economy is still low in view of the limited growth of deposits in the local financial services sector, which amounted to
US$3,2 billion by the end of November last year.
Lending in the local market has also been constrained by the transitory nature of a large proportion of banking sector credit.
According to data from the RBZ, short-term deposits, which comprise demand, savings and under 30-day deposits, constituted 89,3 percent of the total deposits in the banking sector as at the end of November last year.
On the other hand, it has been noted that some companies are struggling to repay loans due to high interest rates.
For instance, as at the end of October last year, nominal lending rates quoted by banks averaged between 8 percent and 32 percent, with most of the banks quoting rates of around 20 percent.
However, analysts Imara Stockbrokers have said the proposed establishment of a credit bureau may contribute to a lowering of rates by reducing risk.
“Companies are currently struggling to deal with loan repayments given the high lending rates, thus the setting up of a credit bureau will go a long way in enabling a part of the risk element to be discounted thereby lowering lending rates,” said Imara.