FOREIGN currency deposits in Zimbabwe’s banking sector increased by 433% to US$1,6 billion in September, with the United States dollar now the dominant currency in an economy where authorities are fighting to end dollarisation, official data showed yesterday.
Speaking at the Zimbabwe Independent Banks & Banking Survey and Awards ceremony in Harare last night, Reserve Bank of Zimbabwe (RBZ) governor, John Mangudya said foreign currency deposits were US$300 million in 2018.
The central bank chief also said Zimbabwe’s financial system’s stability had improved in the post Covid-19 pandemic period.
The US dollar is increasingly dislodging the Zimbabwe dollar, with official reports indicating that 80% of transactions taking place on the domestic market were now in the greenback.
It means the Zimbabwe dollar has been relegated to only 20% of transactions.
This comes at a time when authorities have indicated that they plan to end the multicurrency system in 2025. The central bank chief said the big forex deposits were firmly supported by improved financial inclusion.
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“The state of the banking sector is such that it is resilient, safe and stable to promote economic growth in the country,” Mangudya said.
He told executives at the prestigious event that:“The sector is also innovative to meet the needs of its customers and the requirements of the regulator.
“Confidence in the banking sector improved significantly as depicted by growth in foreign currency deposits from around US$300 million in 2018 to US$1,6 billion as of end of September 2023.
“The banking sector has demonstrated resilience and strong performance with all banking institutions recording profits. Banking sector performance indicators compare favourably to international benchmarks.
“Financial inclusion reached 83% driven largely by digital financial services, about 95% of local currency transactions are conducted through electronic payment systems and mobile transactions account for 80% of total volume of transactions highlighting its significance in promoting financial inclusion,” Mangudya added.
“Current measures to support banking sector resilience and sustainability include frameworks for the smooth functioning of the banking sector and payment systems, risk-based supervision and anti-money laundering, climate risk management, cloud computing and cyber security, fintech and financial inclusion and lender of last resort facility for banking institutions,” Mangudya said.
He said the RBZ was also promoting foreign currency trading through a wholesale foreign currency auction system to drive an active interbank foreign currency market.
“(The RBZ is) developing a sound counter-party risk management system based on the principles of the Bank for International Settlements to promote a vibrant interbank market, improve access and use of wholesale funding in the interbank market, strengthen banking sector integrity through enhanced customer due diligence and electronic know-your-customer principles,” he said.
“Some of the incentives that banks could consider to attract deposits and reduce bank charges include, monthly fee waivers for customers with a bank-specific minimum deposit balance (no frills account).
“This eases the current experience where depositors’ funds are continually eroded by monthly maintenance fees even when no transactions are conducted,” he added.
Stanbic Bank was named the country’s best bank, while Nedbank Zimbabwe managing director Sibongile was voted the best banker.
CABS won the best building society, while NMB Bank Limited received the Digital Innovation award, Steward Bank the Financial Inclusion award and Nedbank Zimbabwe the Environmental Social and Governance award.
This year, three new categories were introduced, whose winners were voted by the public. ZB Bank Limited won the Best People’s Choice award, while Stanbic Bank Zimbabwe was voted the Best Bank for Customer Service and African Century Limited the Best Deposit Taking Micro-Finance Institution Supporting Small to Medium Enterprises.
Speaking at the same event, Faith Zaba, the editor of Zimbabwe Independent, said the winning banks had demonstrated remarkable dedication and innovation “in the face of an ever-evolving financial environment”.
“In a country marked by economic challenges, these financial institutions have shown incredible perseverance. They have continued to support businesses, individuals, and the nation as a whole, even when the odds seemed insurmountable.
“Their contributions to economic growth are immeasurable, and we commend them for their unwavering dedication. Our theme tonight,Achieving Economic Growth Through Sustainable Finance, resonates deeply with the current global trends on responsible and ethical financial practices.
“These institutions have not only weathered the storm but have also actively contributed to the creation of a more sustainable and resilient financial landscape.
“I would like to thank our sponsors, First Capital Bank for standing with us for eight years.”