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Financial sector shallow

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THE financial system is not fully developed to support the huge appetite for capital that exists in the country, Bankers’ Association of Zimbabwe president George Guvamatanga has said.

Report by Mernat Mafirakurewa Acting Business EDITOR

Addressing the tourism business exchange forum at the ongoing Sanganai/Hlanganani tourism fair in Harare yesterday, Guvamatanga said Zimbabwe was at the first stage of financial development.

He said a well developed financial system would have mortgage banks, venture capital institutions and microbanks in addition to commercial banks, among others.

“Unfortunately in Zimbabwe, today, because our financial system is still evolving, a commercial bank is expected to play all these roles and it can’t,” Guvamatanga said.

“So you cannot come into a bank today because you have a bright idea, which I can say is workable, and maybe you have 20% of the capital and you want the bank to finance 80%.

“You need to find an equity financier or a venture capitalist because you can have a bright idea, but the nature of the financial industry we have in Zimbabwe today does not have venture financing.

“We used to have Venture Capital Zimbabwe. It was there for a reason. We had Sedco, it was there for a reason. Agribank was there for a reason. We now have IDBZ. It’s there for a reason. So there is actually an opportunity in banking for other institutions. Unfortunately everyone is converting their licences to commercial banking.”

He said the challenge was lack of financial institutions that were developmental in nature.

“To really ask them to provide developmental finance is almost impossible because they are not designed that way,” he said.

Guvamatanga said at the moment it was much easier to borrow as an individual than as companies.

In terms of priority for finance by local banks, Guvamatanga said tourism ranked below agriculture, mining, ICT, manufacturing, distribution and services.

He said as a result of the short-term nature of deposits, banks were not in a position to offer the much needed long-term finance.

Interest rates remain high

ON interest rates, Guvamatanga said banks were accessing money from multilateral institutions on an average of between eight to 10%.

“So when you get that money at 10% as a bank, you not only need to put in a margin, but also to factor in the real cost of originating that loan, collecting that loan and the bad debt element. I actually believe that anything around 15-20%  is still a reasonable rate for this economy and for this market. But we really have to continue working  to make sure we lower the cost of borrowing, as that is the only way we can induce economic growth and activity in this country.”

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