HARARE – Zimbabwean banks are holding onto nearly US$3 billion in deposits, yet only half of this amount is being loaned out, citing concerns over the nature of deposits, upcoming 2028 elections, and the anticipated end of the multicurrency system in 2030.
In an interview with Business Weekly, Lawrence Nyazema, president of the Bankers Association of Zimbabwe (BAZ) and CEO of CBZ Holdings, estimated that local banks hold about US$2.7 billion in deposits, with nearly 90 percent in foreign currency. Including credit lines contributing an additional US$300-400 million, the total available lending pool is around US$3 billion.
Despite this substantial pool, banks have only advanced approximately US$1.5 billion, resulting in a low loan-to-deposit ratio compared to regional and international markets.
“Banks in Namibia lend roughly 80 percent of their deposits, reserving 20 percent for liquidity. In our case, due to the multicurrency system and a high proportion of demand deposits, we maintain a larger liquidity buffer to meet cash withdrawal needs,” Nyazema explained.
Zimbabwe’s economy heavily relies on cash, particularly foreign currency. Consequently, banks set aside nearly US$1 billion in nostro accounts and cash to ensure immediate availability for client withdrawals. This cautious approach aims to avoid repeating past trust issues in the banking sector.
Nyazema suggested converting current deposits into savings or fixed deposits to improve the loan-to-deposit ratio, noting that the current structure, with 90 percent of deposits in current accounts, necessitates funds be accessible on demand. He also mentioned relying on credit lines, though these can be expensive, with interest rates above 10 percent.
The Central Bank’s decision to raise the statutory reserve requirement for US dollar balances from 15 percent to 20 percent has also contributed to a more cautious lending environment. This measure aims to prevent a recurrence of the Zimbabwe Asset Management Company (ZAMCO) situation, which became a burden for taxpayers due to a high volume of non-performing loans (NPLs).
Regarding reports of banks’ hesitancy to grant loan applications extending past 2028 due to the 2030 deadline for the end of the multicurrency system, Nyazema acknowledged that banks might prefer shorter tenures to manage loan facilities ahead of the 2030 deadline.
“Well, for working capital facilities, the tenure tends to be one year. For medium-term financing, such as capital expenditure, the average tenure is around three years. The market can push out to five years, but some banks may be cautious, preferring tenures that end by 2028 or 2029 to allow clients time to pay,” Nyazema said.
Despite the Government’s extension of the multicurrency tenure to 2030, some banks remain cautious about lending beyond 2028, highlighting concerns about policy reversals and uncertainties, especially as elections approach.
Zimbabwe National Chamber of Commerce (ZNCC) president, Mike Kamungeremu, noted that before the extension, banks were not lending beyond 2025 but have now extended to about 2028.
“When the Government announced the extension to 2030, most banks waited until the monetary policy confirmed it before adjusting their lending periods. Some banks have now extended tenures to around 2028,” Kamungeremu said.
Economist Tinevimbo Shava emphasized the potential negative impact on economic growth due to banks’ cautious lending approach.
“Banks’ hesitation to lend beyond 2028 signals a lack of confidence in the Government’s ability to maintain consistent economic policies, crucial for long-term investments and economic stability,” Shava said.
Economic analyst Namatai Maeresera echoed similar concerns, citing the Government’s history of abrupt policy changes, especially around election times, creating an environment of uncertainty.
“The extension of the multicurrency tenure to 2030 was supposed to provide stability and predictability. However, the fear of potential policy shifts in an election year overshadows this positive development,” Maeresera noted.
The Government faces the challenge of demonstrating its commitment to stability and consistency through actions, not just promises, to restore confidence in the long-term economic outlook. As Shava pointed out, “Economic stability and growth hinge on predictable and reliable Government policies. Without this, the private sector will always remain cautious, and economic progress will be hampered.”
