The agriculture sector got the largest chuck on banking sector loans during the three months to March 2022 as banks continued to focus more on productive sector lending to minimize risks.
Exchange rate fluctuations leading to the depreciation of the local currency complicated matters for lenders as over 55 percent of loans disbursed were in the highly volatile local currency.
Zimbabwe anticipates gross domestic product growth of 5.5 percent this year on good performance from agriculture, mining and manufacturing sectors.
According to the latest Reserve Bank of Zimbabwe (RBZ) first Quarter (Q1) Banking Sector Industry Report, 77.3 percent of total loans were channeled to the productive sectors of the economy against 19.04 percent which was for consumptive purpose.
Of the 77.3 percent productive sector chunk, agriculture got the bulk of the disbursement constituting 25.61 percent followed by the manufacturing sector at 11.60 percent.
There is a deliberate bias towards financing agriculture by most banks which was viewed as a much viable option given the volatility of the economy. This is further aided by gains in agriculture production last year which gave positive sentiment that producers in the sector had capacity to repay.
Banking sector loan portfolio quality remained strong, as reflected by the nonperforming loans (NPLs) to total loans ratio of 1.57 percent as at 31 March 2022, against the international benchmark of 5 percent.
For the period under review, a profit of $27.05 billion was achieved compared to $6.58 billion for the corresponding period in 2021 which the Central Bank attributed to in interest income from loans, advances as well as fees & commission which constituted 34.36 percent and 30.32 percent of total income respectively.
Total banking sector deposits amounted to $582.26 billion in Q1 representing an increase of 22.23 percent, from ZW$476.35 billion reported as at 31 December 2021.
The average prudential liquidity ratio for the banking sector of 61.38 percent as at 31 March 2022 was above the minimum regulatory requirement of 30 percent, reflecting high stock of liquid assets in the sector.
“As part of measures to bolster the stability of the banking sector, the Bank is implementing a number of measures to enhance confidence in the economy, deal with market indiscipline, stabilise inflation and exchange rates and creating a conducive environment to support envisaged economic growth rate for 2022,” said the RBZ.
As at 31 March 2022, there were 19 operating institutions, comprising 13 commercial banks, 5 building societies, and 1 savings bank. In addition, there were 179 credit-only microfinance institutions, 8 licensed deposit-taking microfinance institutions and 4 development financial institutions under the purview of the Bank.
Banking sector assets amounted to $969.24 billion, a position representing 27.04 percent increase from $762.96 billion recorded as at 31 December 2021.
However, the cost of finance remains relatively higher as the Bank Policy rate at the time was 80% which has since been raised to 200 percent.
Experts say the high interest rates may hamper this year’s farming season and also lead to high levels of defaulting.