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Prosper Ndlovu/Oliver Kazunga, Business Reporters

ZIMBABWE’s banking sector advanced an incremental $12,6 billion across different sectors of the economy in 2019, but business analysts say the amount was not adequate to meet industry needs.

Limitations to foreign currency supply and access to funding from the banking sector are regarded as some of the key impediments to the viability of the manufacturing sector in the country, the Confederation of Zimbabwe Industries (CZI) has said. 

While increased loan amounts further buttress the sector’s role in the economy, according to the Central Bank, financial experts have said the bulk of the registered growth was driven by inflation adjustments following the return of the Zimbabwean dollar.

Zimbabwe has 19 conventional banking entities, two development financial institutions, six deposit-taking microfinance houses and 206 credit-only microfinance Institutions. Reserve Bank of Zimbabwe (RBZ) Governor, Dr John Mangudya, said in his recent 2020 Monetary Policy Statement that the banking sector performance remains positive despite economic challenges experienced in the last year.

“The banking sector performed satisfactorily during the year ended 31 December 2019, as reflected by improved capital levels and earnings performance, as well as satisfactory asset quality and liquidity,” said Dr Mangudya

“Financial soundness indicators for the period under review are total loans and advances, which creeped to $12,63 billion from $8,3 billion in the third quarter ended September 30, 2019 while total assets were $60,6 billion at the close of 2019.”

Banking expert, Mr Morris Mpala, said the $12,6 billion loans were a little drop when compared to industry funding requirements. “Inflationary pressures . . . that (loans) wasn’t enough for industry because industry wanted more but banks could not lend more because of the obtaining difficult operating economic environment. In real terms there isn’t any growth per se,” he said.

In its recently issued manufacturing performance survey report for 2019, CZI noted that companies were facing serious challenges in accessing funding from banks. The industry body’s chief economist, Mr Tafadzwa Bandama, said trouble over collateral requirements and non-availability of funds top the ladder while long application processes, power shortages, high cost of doing business among others were some of the drawbacks frustrating businesses. 

Mr Mpala, however, acknowledged that banks have to be seen to make money in whatever environment so that they instill confidence in the financial services sector, which is critical for the economy. 

He noted that at the moment banks were generating more profits through service  charges and significant interest on respective deposits. 

Mr Mpala said most banks reaped huge dividends from investing in Treasury Bills, and were paid back handsomely by Government in 2019.

During the period under review, net capital base for the banking sector was $9,75 billion from $5,35 billion in the third quarter ended September 30, 2019. 

Dr Mangudya noted that a combination of foreign currency and investment property revaluation gains buoyed overall sector profitability during the year ended December 31, 2019.

He said the Apex Bank was strengthening its tools for promoting financial sector stability as well as complementing fiscal policy reforms being undertaken by Government.

On capitalisation, Dr Mangudya said: 

“The banking sector remained adequately capitalised with the average capital adequacy and tier 1 ratios of 39,56 percent and 27,87 percent as at December 31, 2019, respectively, above the regulatory minimum of 12 percent and 8 percent, respectively.

“All banking institutions complied with the minimum regulatory capital adequacy and tier 1 ratios.”

He said as at December 31, 2019, there was a growth in aggregate core capital of $7,47 billion representing a 220,60 percent increase from $2,33 billion as at June 30, 2019.

“The growth in capital was mainly attributed to capitalisation of retained earnings. As at 31 December 2019, all banking institutions were compliant with the prescribed minimum capital requirements,” said the RBZ boss.