Zimbabwe's banking sector is now giving priority to the key productive sectors of the economy after loans to these critical segments of the economy accounted for 72,25 percent of total disbursements last year, reports the Reserve Bank of Zimbabwe.
Zimbabwe's main productive sectors are agriculture, mining, tourism, and manufacturing.
The banking sector has been sourcing lines of credit from different financiers globally to support the key sectors, mainly businesses that are export-orientated or, as in the case of tourism, are foreign currency earners and so able to pay back external loans.
This has kept the domestic economy going despite the absence of long-term concessional support from multilateral lenders and the collapse of many correspondent banking relationships, making affordable external credit hard to come by.
Access to external funding has, however, not been a stroll in the park due to the impact of illegal Western sanctions, which blocked easy access to some key lenders and projected Zimbabwe as a risky borrower, making many available loans pricey.
A banking focus on prioritising productive sectors, as opposed to providing consumptive loans, is critical to enable business and economic growth.
This means that the banks have directed most of the funding at their disposal in supporting for-profit or value-creation initiatives as opposed to consumptive loans borrowed to meet individual or household needs or even to speculate on equity and foreign currency markets.
Limited funding to business and key productive sectors strain the country's potential for growth, which is critical for job creation and sustaining existing ones. Finance, Economic Development and Investment Promotion Minister Mthuli Ncube expects the economy to grow by 6 percent this year, with the World Bank expecting a slightly better 6,3 percent, driven by agriculture, mining and tourism.
Economic growth slowed down markedly last year to just two percent, weighed down by the poor performance of agriculture following the devastating El Nino-induced drought. But despite that drought and its effects on agriculture, Zimbabwe continued to move forward, just more slowly.
According to the 2025 Monetary Policy Statement (MPS), by the end of last year, aggregate banking sector loans and advances amounted to ZiG55,93 billion, representing a 102 percent increase from ZiG27,45 billion reported six months earlier.
"Lending to agriculture accounted for 14,72 percent and manufacturing 14,94 percent of total loans, individuals and households accounted for 25,51 of the total loans, while others were at 2,24 percent," reads part of the MPS.
According to the MPS, the increase in aggregate banking sector loans was largely attributed to the revaluation of foreign currency-denominated loans, which accounted for 88,17 percent of the banking sector's aggregate loans.
As of January 20 this year, the loans and advances amounted to ZiG50,33 billion.
Financial analyst Mr Malone Gwadu said it was encouraging to have more loan funding going to key sectors of the economy as opposed to being skewed towards individual consumption financing.
He said productive sectors needed the funding for working capital gap filling, recapitalisation, technology modernisation, and as shock absorbers during periods of market turbulence.
"Having a huge chunk of funding for production is quite pleasing, as it also feeds through the broader economy through increased production and productivity, job absorption, a widened tax base, and also the potential accelerator effect the funding might have in the economy," he said.
According to RBZ Governor Dr John Mushayavanhu, the banking sector's financial soundness metrics as of the end of last year, indicated that the banking sector remains safe and sound and continues to contribute to economic growth.
As of December 31 last year, 18 out of 19 banking institutions reported core capital above the minimum regulatory capital requirement of US$30 million.
Dr Mushayavanhu said Time Bank, with a reported core capital of US$4,52 million as of December 31, 2024, was authorised to commence limited commercial banking activities, but without taking deposits, in August 2022 so there is no risk to depositors as there are none.
Sign up for free AllAfrica Newsletters
Get the latest in African news delivered straight to your inbox
"The Reserve Bank will leverage the external audit reports in verification of the declared capital positions submitted by banking institutions," he said.
According to the MPS, total banking sector assets increased from ZiG77,55 billion as of 30 June last year to ZiG161,39 billion by the end of the year, and the asset mix remained skewed towards loans and advances, which accounted for 31,39 percent of total banking sector assets as at year end compared to 32,25 percent at mid-year.
A year end, the sector reported an aggregate non-performing loans to total loans ratio of just 3,37 percent, compared to 2.02 percent at mid year, but the year-end ration was still well within the internationally acceptable threshold of 5 percent.
Dr Mushayavanhu said total banking sector deposits continued on an upward trajectory, increasing from ZiG43,60 billion reported at mid-year to ZiG89,07 billion at year end, mainly driven by translation of foreign currency denominated deposits due to exchange rate movements.
