Zimbabwe: Lack of Trust in Banks Drives Cash Shortages
Lack of trust and confidence in banks is one of the reasons the public are not banking their money, a factor partly to blame for the prevailing cash shortages, Finance and Economic Planning Minister Patrick Chinamasa has said.
Government has been battling cash shortages since 2016, which have persisted despite growing use of plastic money, with confidence issues part of the major reasons people are not keen to bank, but stash cash at home.
Minister Chinamasa told Senate last week that the new dispensation had seen some people starting to deposit money in the banks amid hope this will continue.
"I was on my feet the whole day (last week) and much of the time was to explain precisely the challenges that we are facing in the area of cash shortages. In short, the cash shortages are arising not from shortages, but the inefficient circulation of money arising from loss of confidence and trust.
"Even if the Central Bank Governor were to pump billions, whether bond notes or of US dollars, that money will be withdrawn and never re-deposited in the banks," the minister said.
He said that Zimbabwe was faced with a scenario or situation where money was being withdrawn and not re-deposited, meaning it was not circulating.
"The circulation is inefficient and you cannot run the economy that way. Now, when we inquire into the reasons, it is actually boiling down to lack of trust and confidence. I want to say that, because of the recent changes in the new dispensation, I am informed that there has been some improvement," he said
The finance minister said that cash constituted between 10 percent to 15 percent of transactions, which meant, the rest were electronic transactions. Government is confident that businesses are slowly starting to deposit their daily takings, which he said must continue to the public so that confidence is restored.
Monetary transactions in the economy are now dominated by electronic payments with more than 96 percent now conducted through plastic, internet and mobile money.
While the use of electronic forms of payment was driven by cash shortages, this has put Zimbabwe ahead of other countries in the global drift towards a cashless society.
In 2017, plastic money accounted for over 96 percent of the $97,5 billion transactions, from $1 billion in the entire of 2016 processed through electronic and mobile banking systems.
RBZ Governor Dr John Mangudya in his monetary policy statement said the increased use of electronic payment systems would also result in foreign currency savings and de-congest banking halls.
He said there is need to understand that there is a difference between cash and money and the banking public must adapt to the use of electronic money.