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BY OUR STAFF
LONG-term deposits are still a long way from being attained, resulting in the absence of loans with a longer tenure on the market, according to the latest data from the Reserve Bank of Zimbabwe (RBZ).
The data shows that although bank deposits are on the increase, over half constitute demand deposits while long-term deposits constituted a paltry 10% with the remainder being savings and short-term.
The data shows that bank deposits increased to US$3,21 billion in October from US$3,03 billion in September.
The increase was attributed to an increase by US$211,64 million (24,5%) in savings and short-term deposits and US$19,12 million (1,05%) in demand deposits.
However, the increases were partially off-set by a decline in long-term deposits by US$48,14 million (13,8%).
The African Development Bank (AfDB) says the decline in long-term deposits reflects the focus of economic operators on the short-end of the market in Zimbabwe given perceived risks.
Analysts say the mismatch between lending and deposit rates discouraged people from putting money in the banks.
In the nine months to September last year, commercial banks were offering an average weighted lending rate of 11,4% whereas it was 20,4% per annum for merchant banks.
However, the deposit rates have been disappointing in the period under review.
The average three months deposit rate was 9,4% per annum while the average deposit savings rate was 2%.
AfDB says the weak depositor confidence in the formal banking sector and low average incomes, and overall assessment of risk among other factors, explain the persisting liquidity shortages.
“In addition, limited external lines of credit due to perceived country risk and the huge debt and arrears have compounded the liquidity shortages,” it said.
The absence of lines of credit from international financial institutions such as the International Monetary Fund has made investors take a cautious approach.
IMF is regarded as the international “Commissioner of Oaths” and most investors take a cue from the Bretton Woods institution.
The low long-term deposits level paints a gloomy picture for companies which are in need of funding.
Industry is in need of long-term capital for retooling after a decade of recession.
However, the capital is not available locally and companies have to look offshore. The perceived country’s risk has also militated against attracting foreign capital into the country.
Analysts say banks should introduce innovative products to tap into the informal market. The Bankers Association of Zimbabwe estimates that over US$3 billion is circulating in the informal economy which has to be harnessed into the banking system.
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