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Loans: Banks shift to companies

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BY SHAME MAKOSHORI

THE value of banking sector loans increased by $105 billion during the first half of 2021, as financial institutions shifted from consumptive interventions to fund productive sector requirements, Reserve Bank of Zimbabwe (RBZ) statistics showed last week.

Central bank governor John Mangudya said in the mid-term monetary policy statement Thursday that the sector’s combined loans ended at $142,79 billion on June 30, 2021, rising from $37,7 billion a year earlier.

The big shift from an ages old tradition of targeting consumer loans boosted companies’ capacity to respond to volatilities that have rocked industries since COVID-19 broke out last year.

The Confederation of Zimbabwe Industries (CZI) recently said that manufacturing sector capacity utilisation rose to 56% during the second quarter of 2021, compared to 47% at the end of last year, with companies injecting about US$25 million in fresh capital to sustain operations.

Central bank data indicated that about 80,89% of loans were channelled towards productive sectors, with only 17,35% being channelled into consumer spending.

“Total banking sector loans and advances increased by 73,27% from $82,41 billion as at  December 31, 2020 to $142,79 billion as at June 30 2021,” Mangudya said.

He added: “During the period under review, financial intermediation remained stable as reflected by a loans to deposits ratio of 45,84%. This position reflects that there is scope for banking institutions to enhance their financial intermediation role.

“The banking sector continued to support the productive sectors of the economy, as reflected by the ratio of loans to productive sectors to total loans 80,89% as at June 30 2021.

“The performance of loan portfolios of banking institutions was satisfactory as reflected by the average non-performing loans to total loans ratio which remained low at 0,55% as at June 30 2021, against the international benchmark of 5%, reflecting sound credit risk management systems and internal controls.  In the outlook period, credit risk is expected to remain low.”

The steep rise in loans and advances tracked a 49% increase in combined sector deposits, which climbed to $304,95 billion during the review period, after closing at $204 billion in December last year.

This translated to another $100 billion increase in six months.

In its second quarter business and economic intelligence report 2021, the CZI acknowledged that industry together with the general economy were on a rebound.

“Projections and outlook are mainly positive based on expectations that stability will be sustained and inflation will continue downwards.

“This is illustrated by the first quarter capacity utilisation of 47% and 56% projected for the second quarter and the synthesis of the outlook from listed companies’ reports for the first
quarter.

“However, several challenges were faced by business in Q1 (first quarter) that suppressed capacity utilisation. Some of the challenges are COVID-19-induced lockdown in January 2021 and delays in settlement of bids at the foreign exchange auction market,” the industrial lobby said.

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