Finance minister Tendai Biti says an estimated $2 billion remains outside the formal banking sector as a result of lack of incentives and confidence.
Banking deposits are projected to grow to $3,8 billion next year.
Presenting the 2012 National Budget on Friday, Biti said there was no doubt in the last 35 months, developments in the financial sector had been progressively upwards, with deposits estimated at $3,3 billion at the end of September 2011.
He said indications were the deposit base could have been higher had local institutions been fully embracive with regards to mobilisation of all potential domestic savings.
“Hence, part of the liquidity challenges our financial system is experiencing is on account of deposits that are allowed to remain with the public,” said Biti.
“It is estimated that over $2 billion remains outside the formal banking system, on account of absence of incentives and historical confidence concerns, among others.”
Lending to productive sectors during the year grew to $2,59 billion constituting 78,4% of total deposits. Primary beneficiaries were in sectors of agriculture (18%), manufacturing, (20%), distribution (19%) and mining (6%).
Biti noted that compared to previous years, there was a gradual shift in the proportion of lending towards services, construction, communication and individuals, while the share of lending to agriculture, mining and manufacturing remained relatively stagnant.
“Beneficiaries continue to face high lending interest rates of about 15-30%, against deposit rates of as low as 0,2%,” he said.
The Finance minister said notwithstanding the challenges the financial service sector should be commended for continuing to effectively play its intermediation role of transferring investable resources to the productive sectors under an extremely difficult environment.
Biti said given the liquidity challenges in the domestic financial market it was unavoidable for the limited available domestic resources to be complemented by external lines of credit.
He bemoaned the slow disbursements of funds approved under several Industrial Revival Fund facilities as a result of protracted approval processes by some of the lenders.
Following the signing of Zimbabwe Economic Trade Revival Facility and the signing of the Facility Agreement in March projects worth $30,2 million have been approved for disbursement.
In 2012, it is anticipated the full $70 million will be disbursed, given demand for resources.