Online Reporter
Business Reporter
Zimbabwe’s banking sector has experienced a significant surge in interest on loans, highlighting the return to core financial intermediation, latest statistics from the Reserve Bank of Zimbabwe show.
The shift comes as banks move away from volatile revaluation gains, previously a dominant income source, towards more sustainable and revenue streams.
The first-half of 2025 has seen a remarkable increase in income derived from interest on loans, constituting 31,91 percent of total bank earnings, a substantial leap from 10,4 percent in the same period in 2024.
This signals a renewed focus on the fundamental role of banks in facilitating economic activity through credit extension. The growth is directly attributable to a more stable macroeconomic environment fostered by the RBZ’s tight monetary policy.
With re-valuation gains, which once made up over 53 percent of total earnings, now virtually eliminated, banks are incentivised to engage in productive lending, supporting genuine economic growth.
Banking sector loans and advances reached ZiG67,5 billion as of 30 June, 2025, up from ZiG55,9 billion at the end of 2024.
About 72 percent of the loans were directed to key productive sectors such as agriculture, manufacturing, and distribution, underscoring the banking sector’s commitment to financing real economic activity.
Foreign currency-denominated loans continue to form a large portion, accounting for 88,4 percent of the aggregate.
While the sector’s overall net profit saw a decline to ZiG5 billion (US$184 million) from ZiG10,4 billion (US$760 million) in the previous year, this is largely viewed as a “positive recalibration.”
“Earnings are now based more on sustainable economic activities and anchored on real intermediation,” FBC Securities said in its analysis of the 2025 Mid-Term Monetary Policy Review Statement.
“Reflecting the effectiveness of the current monetary policy regime, this earnings structure indicates a more stable operating environment, more predictable and better aligned with sound banking practices.”
Analysts have highlighted the critical shift in the Zimbabwean banking sector’s revenue model, noting a significant move away from an unsustainable reliance on non-core income streams towards a healthier, more traditional approach to profitability.
“For many years, the income mix for the Zimbabwean banking sector was primarily generated from non-interest income,” Mr Gerald Musara, economic analyst, said.
“The significant reliance on non-funded income, while seemingly lucrative at times, was fundamentally unsustainable.
“It was a direct consequence of an economic environment characterised by high inflation and significant currency volatility.
“Banks could book substantial ‘paper profits’ simply by holding foreign currency or appreciating properties, as the local currency rapidly depreciated. This distorted the true performance of the banks and disincentivised genuine financial intermediation through lending.”
Mr Musara added, the volatility in the macro-economy made traditional lending inherently riskier and less appealing.
“Why lend when you could make out-sized gains from currency swings?
“This led to a situation where a substantial portion of bank profitability wasn’t tied to productive economic activity but rather to speculative opportunities and accounting revaluations,” said Mr Musara.
Mr Raymond Madziva, a local banker, said the ZiG’s steadiness had provided lenders with greater clarity in managing their balance sheets.
“For the first time in years, we can model our loan books without constantly second-guessing the exchange rate.
“This is restoring confidence not only for banks but also for clients who transact in ZiG,” he said.
However, he warned that the loss of currency-related windfalls requires a more disciplined growth strategy.
“The post-revaluation environment means banks must double down on core lending, fee-based services and digital products to sustain profitability. The discipline this requires will make the sector stronger over time,” Mr Madziva added.
According to the central bank, profitability margins, as measured by Return on Assets (ROA) at 4,4 percent and Return on Equity (ROE) at 12,8 percent, have narrowed, reflecting a healthier, more grounded profit base derived from operational efficiency and genuine lending.
The aggregate non-performing loan ratio also remained satisfactory at 2,9 percent, well within international benchmarks.
