‘Upward lending trend inimical to economic recovery’

recovery.
In its monthly economic review, the bank said merchant banks’ weighted average base lending rates increased marginally from 18,9 percent in August this year to 19,6 percent in September.
However, commercial banks’ weighted average base lending rates remained unchanged in September.
“The increase in merchant bank lending rates could adversely affect the economic recovery,” said the bank.
Banks weighted average lending rate is the average rate at which banks are lending for a certain period of time.
Statistics from the Reserve Bank of Zimbabwe also indicate that the three-month rates declined from 11,9 percent in August to 8,3 percent in September while savings deposit rates declined from 2,7 percent in August to 1 percent in September.
“The decline in deposit and savings rates is unfavourable in an environment where there is need for increased savings mobilisation in the formal banking sector.”
Since dollarisation the private sector has been grappling with short-term financing offered at higher interest rates. The absence of long-term financing and shortage of cash on the market forced the price of funds to go up.
It is estimated that the country’s deposit base closed the month of September at US$3,3 billion.
Other estimates indicate that the deposit base could have been much higher had institutions fully embraced mobilisation of all potential domestic savings.
It is believed that about US$2,5 billion could be circulating in the economy but outside the formal banking channels.
Finance Minister Tendai Biti in his 2012 National Budget statement said in 2012 deposits are estimated above US$3,8 billion, of which 80 percent would be available for lending.
Lending to the productive sector grew to US$2,5 billion over the period, constituting 78,4 percent of total deposits. Primary beneficiaries were in the agriculture, mining, manufacturing and distribution sectors.
In comparison to the previous year it shows that there is a gradual shift in the proportion of lending towards service, construction, communication and individuals, while the share of lending to agriculture, mining and manufacturing remained relatively stagnant.