Harare - Zimbabweans have continued to borrow from banks despite paying punitive interest rates.
According to the African Development Bank (AfDB) in its latest report on Zimbabwe the overall loan to deposit ratio in the country went up to 91.2% in August up from 87.5% in July.
The report shows that individuals and companies in Zimbabwe have continued to borrow despite the high lending rates prevailing in the country.
With deposits sitting at US$3.59bn in August, banks must have loaned out $3.27bn excluding funds from external lines of credit.
According to the report commercial bank base lending rates for the month of August 2012 ranged between 6% and 35% while those of merchant banks ranged from 15% to 30%.
The rates are way above the Dollar Libor rate for 3 months and 12 months at 0.31% and 0.88% respectively.
On a month-on-month basis total banking sector deposits declined by 2.9% to $3.59bn in August against $3.7bn in July.
The AfDB said the decline in bank deposits and the prevailing non-performing loans, which stood at 12.3% of the loan book as at July 2012 imply increased need for cautious lending. Non-performing loans were around 10% in June.
Of the loans given by the banks, individuals got 13.4%, distribution 20.5%, manufacturing 18.3%, agriculture 22.1% and mining 7.7%.
The composition and the term structure of total bank deposits is very unfavourable as banks might not have enough liquidity to cover increased fund requirements. Of the total bank deposits of $3.59bn in August 2012, $1.93bn is in demand deposits, while $1.14bn is short-term deposits and $0.45bn in long-term deposits.
With the deposits being short term in nature, loaning out the bulk of the deposits, as reflected by the 91.2% loan-to-deposit ratio, will result in a liquidity crisis if there is a sudden demand for cash.
With the approach of the festive season, which is generally associated with increased demand for cash, banks may struggle to meet demands from depositors.
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