Finance

Zimbabwe: Banks still reticent to grant loans despite falling bad debts and record net profits

Monday, 19 November 2018 13:33

In H1, 2018, the Zimbabwean banking sector realized $176.1 million of net profit, according to data gathered by Ecofin Agency. This represents a record level for the period since 2014.

In addition, there was a significant decrease in the burden of bad debts in the loan portfolio. From the highest level of 20.45% reached in September 2014, it continually dropped to reach 6.22% which is the lowest level since 2011.

Despite these positive figures and a now open economy policy, Zimbabwean banks are still reluctant to grant loans. Consequently, the loan-to-deposit ratio is 43.5 %; the lowest level since June 2017 and below the central bank’s benchmark which is 70%. Some other indicators better explain this fact. Indeed, even though the ratio of bad debts is at its lowest level, it is above the benchmark which is 5%. In addition, credits to the economy, payment advances, and investments represent 62% of banks’ assets. Furthermore, 60% of the deposits are overnight deposits. In this economy that faces serious liquidity challenges, it is partly understandable why loan requests require good risk evaluation.

Idriss Linge

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