The average lending rates for individuals declined to 10,98 percent in October this year from 14,16 percent in January while corporates were charged average lending rates of 7,28 percent from 9,66 percent, the central bank said.
While there is a marked decline in lending rates, there are still high compared to those charged the in region.
The nominal lending rates ranged between 4 and 18 percent in October compared with 6 and 35 percent in January. Nominal lending rates depict the range of rates quoted by banks.
The recently launched National Competitiveness Report has identified high lending rates are one of the cost drivers inhibiting business growth and national competitiveness.
According to the NCR, Zimbabwe lending rates are three times more expensive than the regional rates. To make matters worse, they are very short-term in nature, which doesn’t leave room for financing long-term projects, some economic analysts said.
“We are in a global village where those who have a comparative advantage survive,” said one economic analyst with a local financial institution.
“We have already seen how our companies are folding. If you look at the balance sheet of some of these companies, you will notice that finance costs are one of the factors that are stalling companies going concern.”
As an illustration, RioZim said last week it lowered its debt during the last three years from about $58 million to $43,1 million in June this year, despite paying over $52 million towards the debt.
In other words, the company paid about $36,3 million in interests and bank charges alone.
Annual growth in total banking sector credit to the domestic economy increased to 20 percent in October 2015, from 19,7 percent in September 2015.
On month-on-month, banking sector credit rose to $5,196 billion in October 2015, from $5,106 billion in September 2015.
On an annual basis, growth in credit to the private sector, which makes up the largest proportion of banking sector credit, decreased from 2,4 percent in September 2015, to 1,9 percent in October 2015.