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Business Reporter

Banking sector loans to productive sectors of the economy constituted 76,29 percent of the $603 billion that was advanced to borrowers during the half year to June 30, 2022 with the bulk of the funds going towards agriculture.

According to the Reserve Bank of Zimbabwe (RBZ), fostering sustainability has become critical in the changing landscape for the banking sector, following the realisation that strong and resilient banking institutions contribute meaningfully to sustainable economic development and attainment of Sustainable Development Goals (SDGs) by 2030.  

The National Development Strategy (NDS) 1 is clear on the need to adopt globally acceptable sustainability standards, as one of the key pillars for promoting financial sector stability in Zimbabwe and as such, banking institutions are encouraged to embrace and adopt sustainable banking practices.

The RBZ Monetary Policy Statement (MPS) released recently shows that the growth in total loans and advances was largely attributed to the translation of foreign currency denominated loans which constituted 65,87 percent of total banking sector loans.

According to the MPS, the consumer sector accounted for 25,50 percent of the total loans while other areas received 3,38 percent. Distribution and manufacturing sectors accounted for 11,65 percent and 10,03 percent, respectively, while mining and commercial received 7,52 percent and 6,97 percent, respectively.

RBZ governor Dr John Mangudya said that the banking sector’s asset quality remained satisfactory during the period under review, registering average non-performing loans (NPLs) to total loans ratio of 1.50 percent, against the generally acceptable international threshold of 5 percent.

“Banking institutions continue to enhance and adopt sound credit risk management systems and internal controls to minimise potential nonperforming loans against the background of a challenging operating environment.

“The bank will continue monitoring asset quality on an ongoing basis to ensure healthy balance sheets of banking institutions,” he said.

He said that the banking sector remained safe and sound with demonstrable capacity for increased support for the recovery of the economy. As at June 30, 2022, the banking sector comprised 13 commercial banks, five building societies and one savings bank. In addition, there were 183 credit-only microfinance institutions, eight licensed deposit-taking microfinance institutions and four development financial institutions under the purview of the Bank.

Dr Mangudya said that the banking sector was adequately capitalised and the sector average capital adequacy and tier one ratios were 33.87 percent and 18.84 percent, respectively, and above the regulatory minima of 12 percent and 8 percent respectively.

During the period under review, aggregate banking sector core capital increased by 179,29 percent from $100,83 billion as at December 31 2021, to $284,74 billion as at June 30 2022 with the growth in core capital mainly attributed to capitalisation of retained earnings.

Dr Mangudya said that the banking institutions continue to implement various capitalisation initiatives to bolster their capital positions including mergers, organic growth of capital and capital injection by shareholders.

“The bank is monitoring progress periodically to ensure on-going compliance with minimum capital requirements,” he said.

Dr Mangudya said that the bank continues to work closely with all financial institutions in the implementation of the sustainability standards and certification initiative (SSCI) being driven by the European Organisation for Sustainable Development (EOSD).

He said that the pilot participating institutions had registered significant progress in comprehending the key pillars of SSCI. Dr Mangudya highlighted that in line with the bank’s February 2022 Monetary Policy Statement, banking institutions were required to embed sustainability and climate related risks in their corporate governance and risk management frameworks and systems.