The Bankers Association of Zimbabwe (BAZ) has raised concern over billions of dollars being hoarded outside the formal financial system by wealthy individuals, a practice that is depriving banks of essential liquidity needed for long-term lending.
According to BAZ, these individuals have effectively become de facto banks, storing large sums of cash in vaults, safe boxes, and even under mattresses.
Sibongile Moyo, the newly appointed BAZ president and managing director of Nedbank Zimbabwe, said:
…a lot of money is circulating outside the formal banking system. I think individuals (in Zimbabwe) have almost become like banks themselves, probably (having) some more money than what we hold in the banks. So that money is effectively not working for the economy because it’s sitting outside the formal channel—we can’t use it to lend.
Zimbabwe’s entire banking sector holds just US$3.3 billion in total. Of this amount, a significant 58%, equivalent to US$1.9 billion, has already been issued as loans.
An additional 30% is locked in statutory reserves and regulatory requirements, leaving only 12% available for day-to-day liquidity needs and interbank settlements. Said Moyo:
Our members are 19 banks, 14 of which are commercial banks, most of which are relatively large.
We also have four building societies and one Savings Bank. Now as an industry, total deposits that we oversee or look after were the equivalent of US$3.3bn.
So look, the entire market only has US$3.3bn of deposits, which is a very small pool from which to lend.
We’re already lending US$1.9bn, which is 58%. The other 30% is in reserve requirements. That’s already 80% of liquidity that’s committed to loans and regulatory reserves.
So we only have 12% of all the deposits in the economy to make daily settlements for client payments.
Moyo noted that the current structure of market deposits makes long-term lending virtually impossible. She said:
There is no capacity to lend long term because of three reasons. The first is the nature of our deposits—they are largely transitory deposits. More than 70% are current accounts.
These are people who want their money the next day. So you can’t transform that into long-term assets.
The second reason is the fact that if you don’t have a deep capital market or bond market, where companies can go and raise long-term funding, banks remain the sole intermediaries—and they’re ill-equipped.
And the third is you have a lot of money that is circulating outside the formal banking system.
Moyo said that, as a result, the banking industry has turned to external lines of credit to extend its lending capacity beyond the limitations of the domestic deposit base.
There is no incentive for banking cash, withdrawal fees are too high in addition high cost of account maintenance fees
EXACTLY
💯 on point. There is absolutely no reasonable motive for banking. Our banks do not make money from loans but from bank charges.
rather lets take mari ya Chivayo iyiswe mu bank. when we keep our little money its a problem but Chivayo shows off millions everyday on twitter
Banks and the WHOLE formal system CANNOT BE TRUSTED. Make it trust worthy, reduce DRASTICALLY the costs of banking and transacting and the the money will be there!
Who cares, it is their own problem not a national problem your charges are unreasonably high, who let go their money to come back 10 % less what does it help
Who cares, it is their own problem not a national problem your charges are unreasonably high, who let go their money to come back 10 % less what does it help anyways.
Nobody trusts the banking system, charges are high on interest, you banks borrow at 2 to 3 percent and then charge 15 percent you are a bunch of thieves,overseas the banks charge 4 to 5 percent, why should people bank there money they have a right to keep it where they want its not your money you didn’t work for it they did also you profit to keep safe our money and give others who suffer to pay high interest back introduce SHARIAH banking its safer for all stakeholders, people have a right to do whatever they want with there money its not the banks as long as people are paying there taxes go investigate all the wheeler dealers and tenderpreanures who are raping the country who flash there wealth on cars and homes on social media ,