Interbank lending 'must be encouraged in Zimbabwe'

May 30, 2012

Many banks in Zimbabwe are reluctant to lend to each other, a new report from the African Development Bank (AfDB) has found.

Many banks in Zimbabwe are reluctant to lend to each other, a new report from the African Development Bank (AfDB) has found.

The study discovered that although there is liquidity in the market, stronger financial institutions do not want to trade with smaller organisations.

Discussing reasons for the problem, the AfDB report said: "The immobility is attributed to factors that include an inactive money market [and an] absence of government paper in the market due to cash budgetary framework."

Similarly, inadequate financial resources could also be hampering lending, Zimbabwe Finance Minister Tendai Biti said in his 2012 National Budget statement.

If funding was provided, interbank trading could commence and institutions would be able to secure overnight accommodation, which helps reduce exposure to other banks.

Reserve Bank Minister Dr Gideon Gono recently claimed the high bank charges imposed by financial institutions are discouraging businesses from making deposits.

Speaking before a Parliamentary Portfolio Committee on Small to Medium Enterprises, he said a directive will soon be issued regarding the matter.ADNFCR-2976-ID-801375301-ADNFCR