Deposits stagnant at $4Billion

via Deposits stagnant at $4bln – DailyNews Live by Kudzai Chawafambira  4 APRIL 2014

Zimbabwe’s banking sector deposits stagnated at $4 billion in 2013, indicating tightening liquidity conditions, according to Agribank chief executive Sam Malaba.

He said about 80 percent of the deposits remained short term and transitory.

“The stagnation… reflects the deteriorating current account balance,” said Malaba, also the Bankers Association of Zimbabwe (BAZ) vice president.

This comes as BAZ has commissioned a study to ascertain the amount of money circulating outside the banking system, which is estimated to have increased to as much as $7,4 billion.

While initial approximates put the figure at around $2 billion, it is believed that the unbanked money has increased since dollarisation in 2009 with transacting platforms such as mobile money transfer services fuelling the growth.

Market observers contend that the situation is exacerbated by loss of confidence in banks following the 2007-8 financial crisis which saw depositors losing their banked money.

Also, prior to the dollarisation — under which Zimbabwe adopted a multi-currency system dominated by the US dollar — the informal sector flourished as unemployment rose resulting in money trickling out of the formal system.

“This figure currently is unknown,” Baz president George Guvamatanga said recently.

However, he noted that banks’ role as financial intermediaries had not diminished.

“Banks remain the largest importers of cash in the economy. Most of the cash that is circulating outside the banking system originated from the banking sector,” he said.

Guvamatanga — also chief executive of Barclays Bank’s Zimbabwe unit — pointed out that mobile money had somehow demonstrated itself as a disruptive innovation that has changed the role and definition of money in its traditional sense.

He said banks were not afraid of competition from mobile money services but there was need for comprehensive legislation to ensure an even playing field between mobile banking, payment systems and formal banking.

“There is need for interoperability of infrastructure as a necessary condition of mobile banking services. This can be defined as key success factor in the drive towards mobile banking and greater financial inclusion.

“The sharing of infrastructure promotes what is known as economic and productive efficiency while avoiding duplicating infrastructure and leading to dynamic efficiency,” he said, further stating that this would promote healthy competition and product diversity.

“We want regulators to adopt a legal framework that allows collaboration among banks and consumers.”