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Leonard Ncube, Victoria Falls Reporter
RESTORING confidence in the banking sector is critical in transforming the economy and the Government has pledged to continue crafting policies that strengthen the deposit protection schemes.

This comes as the Deposit Protection Corporation of Zimbabwe is hosting a five-day International Association of Deposit Insurers (IADI)’s Africa Region Committee (ARC) annual general meeting and conference in Victoria Falls this week, where regional delegates are discussing various issues related to banking.

This year’s conference coincides with the organisation’s 20th anniversary following its formation on 6 May 2002.

Finance and Economic Development Minister, Professor Mthuli Ncube, who delivered a virtual keynote address said deposit protection plays a key role in protecting the financial sector from risks such as bank closure, which can cripple financial intermediation and derail recovery and sustainable growth of the economy.

“The financial sector is a key player in this economic matrix and banks in particular play a critical role in the attainment of these objectives hence the importance of the Deposit Protection Corporation of Zimbabwe,” he said.

“The presence of the deposit protection scheme has been an enabler of confidence in the banking sector and this ensures financial stability, thus, contributing to economic stability.”

Prof Ncube said mobilisation of savings in the banking sector due to the confidence induced by the deposit insurance scheme enables banks to effectively play their intermediation role.

He said this was demonstrated by the continued banking sector support to the productive sectors of the economy but acknowledged the risks emanating from global inflation that has been on an upward trajectory.

“As Government we continue to support the Deposit Protection Corporation to mitigate this inflationary impact. Through the policies we implement we seek to tame inflation, which will also have a positive impact on the fund.

Recently, the Government introduced gold coins, which will act as an alternative store of value thereby contributing to exchange rate stability and reducing inflation. Interest rates were reviewed upwards to curb speculative borrowing and stabilise the exchange rate.

Government also committed resources towards restoration of lost value to depositors who were affected by currency reforms in 2019 in order to improve public confidence in the banking sector and the DPC is in charge of administering this fund.

Prof Ncube said deposit protection, therefore, helps to foster confidence and hence encourage savings, as depositors will have peace of mind knowing that their money in the banks is safe and in the event of bank failure, they will be reimbursed.

Reserve Bank of Zimbabwe deputy governor, Dr Jesimen Chipika, concurred that deposit insurance systems play a critical role in promoting financial stability and economic inclusion.

“A well-designed deposit insurance system can contribute to the stability of the financial system by instilling public confidence in the financial system and reducing the likelihood of bank runs,” she said.

The conference is being held under the theme: “Building Resilience for Deposit Insurance Systems: The New Normal.”- @ncubeleon .