The Herald (Harare)

Zimbabwe: Time to Restore Trust in Banking Sector


THE country has once more been witness to another banking crisis common with this time of the year. Queues at selected banks have resurfaced and on Monday we saw the ugly side of this at Allied Bank where a depositor, who by right deserved to get his money when he needed it, ran amok triggering an ugly scene.

The biggest question to ask is why, when the sector knows this has been the same story line since dollarisation, is this being allowed to happen. Has the Reserve Bank of Zimbabwe not learnt anything through overseeing each year of crisis?

The central bank as the custodian and supervisor of banking institutions should be at the forefront in protecting depositors who usually are in the dark over what would be happening behind the scenes.

At the moment, depositors are not informed about the liquidity position of their banks. All they know is that Christmas is around the corner and as such they need their money.

Surely the new Basel II requirements (which they are reminded to adhere to as regulators) now look to pre-empting such situations.

A lot of pertinent questions are now being overlooked?

The "depositors" are our parents, relations, brothers and sisters, that have mouths to feed, rent to pay, school feels, medical costs, electricity etc . . . This is now a crisis yet as per usual . . . no sense of urgency on the part of the authorities.

The truth is the banking sector is not being honest about its current state even though it's very clear that they may be sitting on a time bomb. Bankers need to tell the country the truth about the real causes of the liquidity crunch in their sector and the level of non-performing loans.

Exacerbation of this crisis will certainly further dent public confidence in the operations of banks. And this could be the reason why an estimated US$4 billion is thought to be circulating outside the banking sector.

Banking is all about trust. People will always remember especially when it comes to where they keep their money.

Bankers need to be reminded that deposit growth is a function of economic growth and confidence in the banking system.

Without confidence, it will be impossible to achieve the "twin challenges of engineering a recovery and reforming the financial system.

Although the economy is poised for positive growth under the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim Asset), the following factors militate against confidence in the banking sector; capitalisation pressures in the banking sector which have seen a significant change in ownership for some banking institutions; the large asset-liability mismatch and non-performing loans since 2009 and an inefficient RTGS payment system, which has resulted in the loss of depositor confidence.

We believe it may take time for the banks to restore lost confidence.

The other factor is that the deterioration in banking asset quality as reflected by the level of non-performing loans and poor disclosures.

But going forward what is clear is this; trust has been lost and the digital world is here and this is where Econet has overtaken banks. The telecoms company through its overlay services is constantly taking up the banking space. Would anyone blame them if they record runaway successes with such services which have proved to be safe for depositors?

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