Last month a senior manager with Kingdom Financial Holdings Limited said deposits in Zimbabwean banks were low despite the fact hat the country has a very high literacy rate.
"Data from the Reserve Bank of Zimbabwe indicates that annual Broad Money supply (M3) growth, defined as total banking system deposits, declined to 48,4 percent in April, 2011 from 253,7 percent in March, 2010, as the economy was recovering from a low deposit base," the Review said.
"Annual growth in deposits held by banks stood at 48,4 percent in April, 2011, from 52,6 percent in April, 2011. In absolute terms, however, the level of deposits rose from $1,75 billion (23,4 percent of Gross Domestic Product)) in April, 2010 to $2,60 billion (29,1 percent of GDP) in April, 2011.
"Month-on-month M3 growth slowed down from 4,9 percent in March, 2011 to 0,9 percent in April, 2011. The monthly deceleration in M3 growth was underpinned by a slight decline in long-term banking sector deposits."
Deposits were largely of a transitory short-term nature.
"However, the banking sector is still experiencing persistent liquidity shortages, lack of depositor confidence, low savings, low average deposit rates, high average lending rates, short-term nature of deposits, laxity in bank regulation and supervision, poor corporate governance, limited lender-of-last resort facility at the Central bank, limited inter-bank trading and uncertainty about the future of the banking sector," says the report.
In the long-term, this was likely to have implications on the overall recovery of the economy because, to boost production, companies required affordable long-term bank finance.
"The recent renaissance Financial Holdings default on loan repayment and the revelation by the RBZ of shareholding, board and corporate governance flaws, irregular inter-company transactions and the possibility that the institution is under-capitalised may reflect attendant banking sector vulnerabilities," the review said.
The corporate sector is expected to benefit from a $100 million Africa Export Import Bank facility to recapitalise local companies.
Four local commercial entities have already signed a deal with Afreximbank on the modalities of the facility.
The commercial banks are TN Bank Limited, a subsidiary of TN Financial Holdings currently under Tawanda Nyambirai, FBC Bank, a subsidiary of FBC Banking Corporation under new boss, John Mushayavanhu, Bank ABC, a subsidiary of the African Banking Corporation under Douglas Munatsi, and NMB Bank, a subsidiary of NMB Financial Holdings headed by James Mushore.
Post published in: Business