Zimbabwe: "Demand for credit outpaces supply", according to new research

May 14, 2013

Although long-term deposits have more than doubled in 2012, banks are struggling to meet the growing demand from various sectors of the economy, according to a new report from research firm MMC Capital.

Although
long-term deposits have more than doubled in 2012, banks are struggling to meet the growing demand from various sectors of the economy, according to a new report from research firm MMC Capital.

"Despite
a
marked
improvement in the long term component of deposits from
9.6
percent in December 2011 to 20.65 percent in December 2012, the capacity of banks to extend the much needed long term facilities to various sectors of the economy remains constrained as demand for credit outpaces supply," according to the research.

Bank deposits have been increasing since dollarisation in 2009, but most of it has been transitory in nature due to low disposable incomes, The Standard reports.

The short-term nature of deposits,
as well as high liquidity risks, would correspondingly lead to short-term lending, according to the report, which adds that Zimbabwe is heavily burdened by its massive external debt, thus imposing a huge country risk premium on Zimbabwe, further stifling capacity for credit growth.

MMC Capital added that the country risk will remain the greatest hindrance to accessing offshore lines of credit and with the export sector struggling to recover, "the gap between demand and supply of loanable funds will likely persist, exerting upward pressure on lending margins".ADNFCR-2976-ID-801584892-ADNFCR