John Nhambura is a new farmer and a beneficiary of the countrys land reform programme. (Pictured: As new black farmers start producing, is the banking sector able to support them?)
He does his farming in Karoi, about 200 km west of the capital. For the past eight years since being allocated the piece of land John has been, like all other farmers, surviving by selling the given inputs either on the black market or to private buyers for cash.
The resultant stability that the power sharing agreement brought meant the return to formal ways of doing business which John is not aware of. The settling of the dust saw John, for the first time in eight years, producing a crop for sale on the formal market, but, this meant having to have a functional bank account.
For years John had developed a negative attitude towards banks, a feeling which was heightened when all his savings went down the drain at the height of the economic crisis in the country. Johns predicament is shared by many who have lost confidence in the banking sector.
The 2003 banking crisis, which saw close to 15 financial institutions being placed under curatorships followed by the adoption and implementation of failed economic policies, has seen the financial services sector potential diminishing.
Companies, organizations and individuals have resorted to keeping their money in safes instead of the bank. An official with the Bankers association of Zimbabwe said a lot more needed to be done to instil confidence in the sector. “It is a worrisome trend, but we are hoping that with the coming on board of the new players some level of confidence is likely to return to the sector,” said the official.
The Reserve Bank of Zimbabwe recently gave the green light to banks closed during the turbulent 2003-04 period. Time bank, Barbican Bank, Royal Bank and Trust Bank are set to bounce bank before year end. Although the coming on board of new players is a positive sign, analysts are sceptical of the impact they will have on the economy.
“Most people are no longer banking and some companies are actually encouraging their workers not to. Some big companies do not have a functional bank account and their workers are paid in cash, said an employee from a leading manufacturing company.
The hyper-inflationary environment which characterized the period after the closure of the banks also worsened depositors perception of the sector. The galloping inflation saw both individual and companies life-long savings losing value over night. Failure by banks to offer meaningful credit facilities and withdrawal limits has also dampened the prospects of a quick recovery in the sector.
Bankers Association of Zimbabwe President, John Mushayakarara, recently dispelled the notion from the market that the country was over-banked, saying the sector had prospects for growth. Analysts have argued for the existing bank to from mergers as a survival plan in the face of depressed operating environment.
The country’s economic growth can only be attained by having a sound banking sector, a situation which makes the current situation in the sector worrisome. Finance Minister Tendai Biti recently challenged the sector to take up its position in the economy.
Post published in: Economy