Street hawker Yvonne Chikotsa last visited a bank in 2008, near the zenith of Zimbabwes hyperinflation.
She would wake each morning at dawn to beat long lines and withdraw more than one trillion Zimbabwean dollars, which was what a loaf of bread cost at the time.
I still have mortal fear of banks, said Chikotsa, who sells used clothing at a market in Harares impoverished Mbare district. She blames the Reserve Bank of Zimbabwe for allowing the runaway inflation that destroyed the value of her modest income. Now, she says: My pillow is my bank.
Zimbabwes economy is growing, in part because the government in 2009 discarded the countrys currency in favor of the US dollar. The move tamed inflation and slowed a rush to the exits for investors.
Yet deep-seated distrust of the governments handling of money matters lingers among ordinary Zimbabweans, depriving banks of the deposits they need to drive a faster economic expansion that might ease some of the countrys tensions.
The uncertainty has turned Zimbabwe into a nation of hoarders. The grubby graying American dollars on Zimbabwes streets including bountiful supplies of $2 bills, last printed by the US Treasury in 2006 attest to a robust cash economy that largely bypasses the countrys banks.
Deposits in Zimbabwes banks have recovered from $1,25 billion at the beginning of 2010 to some $3,3 billion since dollarisation, but people hold more than that amount or about $3,5 billion outside of banks, according to the Bankers Association of Zimbabwe.
Zimbabwes cash-starved banks, and a central bank that has lost control of its currency, mirror challenges in other countries, including Greece, Malawi and Swaziland. But troubles at Zimbabwes central bank have reached a different level of dysfunction.
Over the past decade, the Reserve Bank lent $1,5 billion to President Robert Mugabes government for pet projects. The bank now owes $1,1 billion to a cast of regional development and central banks that it says it cant repay because the government hasnt reimbursed it.
Gideon Gono, who has led the Reserve Bank since 2003, is also battling allegations he has embezzled millions in central bank funds for personal use.
Gono hasnt publicly addressed the allegations, and in an email response to The Wall Street Journal, Gono declined to comment in detail. He said he would respond to pressures about the allegations at the appropriate time.
In the meantime, the bank cant even serve as Zimbabwes lender of last resort. The government is in talks with the African Export-Import Bank to create a $100 million programme to restart the lender-of-last-resort facility.
Short of that, if the central bank cant step in to guarantee bank lending, liquidity will dry up, which is what has happened.
The string of troubles has left Zimbabwes financial system gasping, depriving businesses of capital at a time of sky-high unemployment.
Zimbabwe officials estimate 90% of the countrys working-age population is unemployed.
After Zimbabwe abandoned its currency in favor of the greenback, the economy grew at an annual rate of 6% in 2009 and 9% in 2010. But growth dropped back to a rate of 6% last year and will fall to 3,1% this year, the International Monetary Fund predicts.
The crippled banking sector is contributing to the eroding growth rate, said Yvonne Mhango, Renaissance Capitals economist for sub-Saharan Africa.
Basically there is no monetary policy. I think theyre out of ideas, Mhango said. The banking troubles have dimmed an already bleak investment picture.
The country has untapped deposits of platinum and rich agricultural land. But few are willing to risk losing their investment to the indigenisation agenda of President Mugabe, which aims to transfer farms and control of businesses and mines to blacks.
The Reserve Bank of Zimbabwes ideas for shoring up the financial sector have had a similar effect, economists say. In February, the central bank demanded that foreign banks, including Barclays PLC and Standard Chartered PLC, keep at least 70% of local deposits and assets in the country.
Gono has promised meetings with banks and unspecified punishment for those that dont comply.
A spokeswoman for Standard Chartered in Harare, Lillian Muchafara Hapanyengwi, said the bank always tries to comply with local laws.
All regulatory issues are given the highest attention, Hapanyengwi wrote in an email. Barclays didnt respond to requests for comment.
The demands have made banks hesitant to lend in Zimbabwe, hurting small domestic ventures that need capital to expand.
Tofara Kwenda, who earns $1 000 a month as a field officer for a democracy-advocacy group, applied last year for a $2 000 loan from Standard Chartered to open a candle-making business.
He says the bank never ruled on his application, even after a bank official called to scold him for complaining on his Facebook page about the slow process.
Eventually, he got a loan from one of the many for-profit microfinance firms that have proliferated in Zimbabwe as traditional banks have pulled back.
The banks are not grateful, Kwenda said.
I am just using my bank account as a conduit to get my salary, which I immediately withdraw and keep at home.
The distrust of banks is a problem for small domestic lenders that havent been able to rebuild deposit bases enough to expand their businesses, economists say.
Many of Zimbabwes local banks have merged or sold majority stakes after struggling to meet capital requirements. The government is pushing for more consolidation.
Meanwhile, Zimbabweans are trying to get by without traditional loans and bank accounts.
Chikotsa, the 33-year-old clothing merchant in Harare, said she had never heard of Gono or Zimbabwes reserve bank until her small deposits started losing their value so rapidly.
The government says it wants to compensate depositors for the money they lost. But three years have passed, and Chikotsa is still waiting.