• Climate change update

    We need to cast off yesterday's ideas and put earth's wellbeing first, says Mandi Smallhorne.

  • Lessons from KPMG

    KMPG has learnt the hard lesson that SA is fed up with corruption, says David Everatt.

  • Terry Bell's Inside Labour

    Will it be man vs machine in the scary self-service future into which we are all being dragged?


Zimbabweans ignore high lending rates

Nov 07 2012 08:58
Malcom Sharara, Fin24's correspondent in Zimbabwe
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.

Follow Fin24 on Twitter, Facebook, Google+ and Pinterest.

zimbabwe  |  debt  |  interest rates



Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Comments have been closed for this article.

Company Snapshot

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

The SARB’s Monetary Policy Committee will decide on the next move in interest rates tomorrow will they?

Previous results · Suggest a vote