TOP banker Nicholas Vingirai says the banking system needs to be reformed so that it concentrates on its mandate and not milking customers through exorbitant transaction charges.
The banking sector is grappling with multiple challenges, significantly constraining its ability to lend.
Among the primary issues are the absence of a lender-of-last-resort function for United States dollar-indexed transactions and a prevailing liquidity crisis in the market.
This has led banks to adopt a cautious approach to lending, with prolonged market volatilities making them wary of extending credit.
Vingirai told delegates at the Ideas Festival held in Nyanga yesterday that there is a need to restructure the sector to focus on its mandate.
“We no longer have a functional banking sector. We have got, I don’t know how to call it . . . you cannot say maybe you are going to a bank,” Vingirai told delegates.
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The event was organised by the Alpha Medias Holdings, publishers of daily NewsDay, weeklies The Standard, Zimbabwe Independent as well as operating online broadcast station Heart & Soul TV.
“So, we need to rebuild these institutions. Starting with the central bank, and then allowing the banking system to be restructured and reorganised,” Vingirai said.
“If I ask a banker today to say, can you define a bill of exchange for me? They do not know it, a funding instrument called a banker’s acceptance, they do not know it. They are abusing this technical talk through the reviews.”
Vingirai emphasised the need to address the issue, starting with the central bank, also putting focus on restoring confidence in the local currency.
“The banking sector does not have the wherewithal to fund the industry. There are several reasons,” he said.
“In many instances, it is because of the way our economy is. Our currency is such that nobody wants to transact in it.”
According to the Bankers Association of Zimbabwe (BAZ), Zimbabwe’s loan-to-deposit ratio fell behind that of neighbouring countries like Malawi and Botswana between April and June this year.
In August this year, BAZ president Lawrence Nyazema said local banks were required to set aside funds to maintain a prudential liquidity ratio of 30%, effectively reducing the amount of money available for lending.
World Bank statistics show that Zimbabwe’s bank deposits-to-gross domestic product ratio stood at 15,9% in 2021, a figure considerably lower than Zambia’s 23,2%, Botswana’s 47%, Kenya’s 35,9%, Mozambique’s 51,2% and South Africa’s 60,4%.