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Tawanda Musarurwa Senior Business Reporter

Local banks want all funding programmes to come through the financial services sector, Bankers Association of Zimbabwe (BAZ) vice president Ron Mutandagayi has said.

Mr Mutandagayi said the restructuring of the Command Agriculture model last year was a step in the right direction.

Last September, the Government announced the adoption of a new funding model for Command Agriculture for the 2019/2020 season that would see it providing guarantees with banks and the private sector funding the programme to unlock the required $2,8 billion.

Government went on to invite private partners to fund the programme at an interest rate not exceeding 20 percent, effectively diluting its previous role as the sole financier of the programme.

Said the BAZ vice president on Monday: “We are particularly pleased with the leasing agreement around agriculture.

“The previous arrangement on agriculture tended to crowd out financial institutions and we are now on a trajectory where we are crowding them in.”

Mr Mutandagayi made these comments during a post-mortem mid-term fiscal policy review meeting.

“Ultimately we need to go back to a position where lending for anything, including agriculture must come from the banking sector. We have already started the journey along those lines.”

Over the past few months, the local banking sector has recorded an improvement in non-performing loans, with figures from the Reserve Bank of Zimbabwe (RBZ) showing a decline in the non-performing loans (NPLs) to total loans, from 1,75 percent as at December 31, 2019 to 1,42 percent as at March 31, 2020. This is despite the effect of the Covid-19 pandemic.

The sector’s fundamentals seem to be in the right place as indicated in the Mid-term Fiscal Policy Review.

“The banking sector remained adequately capitalised, with aggregate core capital of $10,74 billion, as at March 31, 2020, representing a 43,78 percent increase, from $7,47 billion as at December 31, 2019,” said Finance and Economic Development Minister Mthuli Ncube last week.

“The growth in capital was mainly attributed to capitalisation of retained earnings, with the major contributor being revaluation gains of assets held by banking institutions.”

Meanwhile, the BAZ has commended the monetary authorities in taking cognisance of its recommendations to establish the foreign currency auction system, which has seen a modicum of price stability in the economy.

“The introduction of a Foreign Exchange Auction System has been a key recommendation item in BAZ’s regular inputs to the Monetary and Fiscal Authorities,” said the BAZ in a statement.

But observers are of the opinion that local banks are yet to effectively participate in the auction system.

“We are disappointed that banks did not come to the market, again. Foreign exchange supply should not be left to the RBZ.

“We know that banks are trading foreign currency and they should participate in the auction,” said economist Eddie Cross just after the conclusion of yesterday’s auction.