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Nqobile Bhebhe, Senior Business Reporter
ZIMBABWE’s banking sector recorded un-audited aggregate profits of $181,25 billion for the half-year ended 30 June 2022, a 12-fold increase from $15,09 billion reported in the corresponding period in 2021.

According to the half-year monetary policy statement released by the Reserve Bank of Zimbabwe (RBZ) Governor, Dr John Mangudya, last Thursday, the growth in banking sector income was largely spurred by non-interest income, which constituted 79,03 percent of total income.

According to the report, there was a significant increase in foreign currency denominated loans constituting 65,87 percent of total banking sector loans.

“Aggregate banking sector loans and advances increased 2,64 times from ZW$229,94 billion as of 31 December 2021 to ZW$603,14 billion as of 30 June 2022, largely attributed to the translation of foreign currency denominated loans,” said Dr Mangudya.

“As of 30 June 2022, foreign currency denominated loans constituted 65,87 percent of total banking sector loans, an increase from 36,87 percent reported as of 31 December 2021.”

During the period under review, financial intermediation as measured by loans to deposit ratio, improved from 48,27 percent recorded as of 31 December 2021, to 53,69 percent as of 30 June 2022.

Loans advanced to the productive sectors accounted for 76,29 percent and the consumptive side had 25,50 percent of total loans as of 30 June 2022.

In terms of distribution, the agriculture sector received 26,43 percent, distribution (11,65 percent), manufacturing (10,03 percent), mining (7,52 percent), commercial (6,97 percent) and mortgage had 5,21 percent. The remainder went to construction, transport, communication, and financial.

Dr Mangudya said the banking sector  remains safe and sound despite the shocks caused by challenges in the operating environment and its performance shows it is in a position to support the recovery of the economy.

“The banking sector remained safe and sound with demonstrable capacity for increased support for the recovery of the economy, notwithstanding the challenges in the operating environment,” he said.

“As of 30 June 2022, the banking sector was adequately capitalised. The banking sector average capital adequacy and tier one ratios were 33,87 percent and 18,84 percent, respectively, and above the regulatory minimum of 12 percent and eight percent, respectively.

“Aggregate banking sector core capital increased by 179,29 percent from $100,83 billion as of 31 December 2021, to $284,74 billion as of 30 June 2022.”

Fostering sustainability, Dr Mangudya said, has become critical in the changing landscape for the banking sector, following a realisation that strong and resilient banking institutions contribute meaningfully to sustainable economic development and attainment of Sustainable Development Goals (SDGs) by 2030.

As of 30 June 2022, the banking sector comprised 13 commercial banks, five building societies, and one savings bank, he said.

There were 183 credit-only microfinance institutions, eight licensed deposit-taking microfinance institutions and four development financial institutions under the purview of the central bank.

Dr Mangudya said growth in core capital was mainly attributed to capitalisation of retained earnings.

He said players in the sector continue to implement various capitalisation initiatives to bolster their capital positions including mergers, organic growth of capital and capital injection by shareholders.

“The bank is monitoring progress periodically to ensure on-going compliance with minimum capital requirements,” he said.

Economist Dr Prosper Chitambara told Business Chronicle that a sound banking institution was critical for economic growth.

“Definitely robust financial sector is critical for financing development. No country can actually prosper without a strong financial sector, so there is a strong positive relationship between financial sector development and economic growth and economic development on the other hand.

“It’s always important to ensure that the banking system or financial system is well capitalised and that there is good corporate governance, which is also critical for effective and efficient performance by the financial sector.”

Economic analyst, Mr Morris Mpala, also said a robust financial services sector was the backbone of all financial transactions from lending, interfaces between stakeholders, payment systems, savings culture and custodial services.

“A sound banking services sector gives confidence to industry and confidence, thus, aiding the gross domestic product,” he said.

“And for the transaction public, that gives more convenience, trust and cultivates formal transactional relationships.”