HomeNewsPersonal loan appetite surges

Personal loan appetite surges

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The appetite for personal loans continues to grow in Zimbabwe amid revelations borrowings from banks have trebled since the beginning of the year, while the manufacturing sector continues to be underfinanced.

Reserve Bank of Zimbabwe governor Gideon Gono told a business meeting in Nyanga recently that local banks had tilted their lending in favour of individuals.

He said personal loans advanced were expected to rise to 25% of the total loans channelled by the entire banking sector by year end.

Official figures have shown that the loan-to- deposit ratio last year rose to 71,7% from 49,3% when the multiple currency system was introduced on the back of growing deposits estimated at $4 billion.

“What we are seeing is a reduction in loans in businesses,” Gono said.

“Since January, loans to individuals have more than trebled to around $2 billion.

“As at July 20, personal loans accounted for 18% and it could go up by 25 % by end of year.
“We are turning our country into a nation of traders, we are not exporting enough. The current regime of policies is killing industries.”

At its peak, the manufacturing sector used to contribute almost 25% of the country’s Gross Domestic Product as well as 30% of the export revenues.

Analysts said the appetite for loans was being driven by the low salaries that were in most instances below the poverty datum line of $550 per month.

According to a recent Finscope survey conducted by the Ministry of Finance published in May, every second a Zimbabwean borrowed money in the last 12 months.

The central bank chief warned against over reliance on the earnings from the platinum sector saying if prices fell this could result in a serious crisis for the country.

“The mining sector is the goose that lays the golden eggs and the platinum sector is the major contributor of earnings as it brings about 45% of the total earnings,” Gono said.

“You can’t have such huge disproportionate distribution of wealth. If the wheels come off, this country will be in a crisis.”

He said the country was “extremely over dependent on the platinum. As long as our growth is not inclusive, we have got a recipe for disaster.”

Zimbabwe has got the second largest platinum reserves in the world after South Africa.

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