Zimbabwe banks reluctant to lend despite rise in deposits

HARARE,– Zimbabwe’s banking sector deposits continue to grow but loans and advances dropped as banks remain cautious about lending in the poorly performing economy.

Presenting the Mid-Term budget review on Thursday, finance minister Patrick Chinamasa said total banking sector deposits stood at $6,6 billion in the first quarter of 2017, up  from $6,5 billion as at December 31, 2016, while total loans and advances declined to $3,59 billion as at March 31, from $3,7 billion as at December 31, 2016.

The central bank has taken initiatives to restore confidence in the financial sector, which include the establishment of the Zimbabwe Asset Management Corporation (ZAMCO) and a credit registry in an effort to curb a high rate of non-performing loans.

As at December 31 last year, ZAMCO had bought bad loans worth $813 million, which peaked at 20,45 percent in June 2014.The non-performing loans declined to 7,87 percent in 2016, Chinamasa said.

Bank deposits remain mainly of short term nature, with demand deposits accounting for 54,6 percent of the total banking deposits while time deposits and savings deposits contributed 26,9 percent and 4,7 percent respectively.

Short-term deposits are not conducive for economic growth as they limit the availability of long term loans.

The distribution of loans and advances continued to be skewed towards individuals, with salary backed loans accounting for 28,8 percent of total credit extended, followed by agriculture and distribution at 16,7 percent and 15,4 percent respectively.

Essential sectors such as manufacturing and mining received 10 percent and 5 percent respectively while construction received just below 5 percent of the total loans and advances.

Chinamasa said the central bank captured 60 percent of the total banking sector loan records into the credit registry , comprising both individuals and corporates as at March 31, 2017.

The credit registry is expected to promote responsible borrowing through reducing information asymmetry among lenders, thereby reducing overindebtedness among borrowers.