Published by the government of Zimbabwe
9 July 2009
editorial
Harare — The role that financial institutions play in any economy can hardly be overestimated. The pulse of any economy is determined by the state of its banks, hence their conduct defines the economy.
It is with this in mind that we find banks' inexplicable behaviour to retain substantial amounts of money at the expense of this economy unacceptable.
There is a chorus of disapproval at this kind of behaviour as underlined too by Reserve Bank of Zimbabwe Governor Dr Gideon Gono on Tuesday at the unveiling of the gold bought by small miners supported by TN Bank.
How do banks explain the fact that they are sitting on US$600 million when industry is in dire need of such funds to increase production?
As attested to in this instance, when capital is made available to the private sector, the economy stands to benefit immensely.
The potential resident in agriculture, mining, manufacturing and tourism, among others, can significantly alter the face of the economy if supported financially, with earnings therefrom boosting our foreign currency reserves.
This calls for banks to support all endeavours which will put our economy in better stead.
The manufacturing sector, for instance, has said it can achieve increased production of up to 60 percent by the end of the year from a mere 10 percent in January but this will not happen unless they get financial support from lending institutions.
The agriculture sector, on the other hand, is ready to play its part in rejuvenating the economy but its wheels need oiling from banks.
Yet, tragically, those banks with the wherewithal to do this have been generally inactive. It had to take small players such as POSB and TN Bank to show the way. CBZ Bank has also chipped in with assistance in this instance.
The fact that, as we reported yesterday, a US$500 000 finance facility from TN Bank was used to buy 50 kilogrammes of gold is instructive.
Where are the other banks? Do they not see the benefits of capitalising industry in what is clearly a win-win situation?
Their very state is dependent on that of the economy, which they are negating by either acts of omission or commission.
How then, given the foregoing, does one account for the fact that banks are sitting on US$600 million?
Banks, in a normal set-up, earn the bulk of their income from interest charged on loans, so it baffles the mind to hear of some banks who are selling airtime to earn revenue while sitting on funds which they could on-lend at a profit.
Is this prudence or inertia? A cost-benefit analysis would be telling.
But, of course, there are two sides to every story.
Arguments have been advanced to the effect that the money banks have belongs to depositors who would want to have it on demand but to what extent does this hold true of the funds said to be sitting in the banks' coffers?
Of course, depositors will demand their money and they expect to have it when they come for it. Any sign of unavailability of funds can lead to a run on deposits.
However, in this regard the banks themselves fully appreciate the matrix involved and they have always been in the business of lending. Finding a balance between depositors' funds and money loaned to firms and individuals is not a tough call to them.
This economy needs players who will go beyond the norm. When we have lesser capitalised banks paving the way, we certainly wonder about the more established ones.
Do they need to be galvanised to action? Are they appreciative of the cliché that "no guts, no glory"?
In the isolated instances that some of the big banks have extended facilities to the private sector, they have put restrictive repayment conditions of up to three months, a period too short for projects in such sectors as farming.
Of course, other industries such as manufacturing have a faster turnaround time and can pay back within the stipulated period.
The central bank, in this instance, needs to engage the banks to see how they can become more active in supporting business, hence fulfilling their intermediary role in the economy.
We submit that this economy needs proactive and daring measures to fulfil its potential. Let us all come aboard to realise this.
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