Statistics from the Reserve Bank of Zimbabwe show that bank deposits closed last year at around US$2.1 billion.
The Zimbabwe Monthly Economic Review for the period June 2011, said the level of deposits had increased during the period.
But the depressed performance of long-term deposits had undermined the financial services sector. “Data from the Reserve Bank of Zimbabwe indicates that annual Broad Money Supply (M3) growth, defined as total banking system deposits, declined to 48.4 percent in April, 2011 from 253.7 percent in March, 2010, as the economy was recovering from a low deposit base.”
Annual growth in deposits held by banks stood at 48.4 percent in April, 2011, from 52,6 percent in April, 2011.
“In absolute terms, however, the level of deposits rose from US$1.75 billion (23.4 percent of Gross Domestic Product in April 2010 to US$2.6 billion (29.1 percent of GDP) in April, 2011.
“Month-on-month M3 growth slowed down from 4.9 percent in March, 2011 to 0.9 percent in April, 2011.
“The monthly deceleration in M3 growth was underpinned by a slight decline in long-term banking sector deposits,” reads the Zimbabwe Monthly Economic Review.
It also noted some of the vulnerabilities posing a constant threat to the sector.
“However, the banking sector is still experiencing persistent liquidity shortages, lack of depositor confidence and low savings,” the report said.
“Low average deposit rates, high average lending rates, short-term nature of deposits, laxity in bank regulation and supervision, poor corporate governance, limited lender-of-last resort facility at the central bank, limited inter-bank trading and uncertainty about the future of the banking sector are some of the issues.”
Some of the concerns expressed by the AfDB have been magnified by the recent Renaissance Merchant Bank crisis in which the bank defaulted on a loan repayment.
There were also irregular inter-company transactions.
In the long term, it is predicted that these frailties could have repercussions on economic recovery, in respect of boosting production as companies continue to struggle to access cheap loans.
Meanwhile, the AfDB Zimbabwe Monthly Economic Review revealed that the country’s corporate sector could soon benefit from a US$100 million Africa Export Import Bank (Afreximbank) facility to recapitalise companies.TN Bank Limited, FBC Bank, BancABC and NMB Bank are said to have already signed a deal with Afreximbank on the modalities of the facility.