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Banking sector loans, advances on the rise, says central bank

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BANKING sector loans and advances in Zimbabwe are on the increase, with foreign currency loans accounting for 32 percent of all advances, the central bank says.

The non-performing loans ratio has sagged to below 1 percent.

Although Zimbabwe has largely battled for currency stability, its banking sector, including units of Nedbank, Standard Bank and Standard Chartered, has been boosted by a 53 percent surge in income growth, as well as a surge in non-interest income, owing to the robust uptake of digital, mobile and online banking.

The Reserve Bank of Zimbabwe (RBZ) said this month that “total banking sector loans and advances increased by 22.98 percent” for the September 2021 quarter. The loans and advances in Zimbabwe’s financial services sector amounted to the equivalent of around $305 million (R2 billion) using the official exchange rate of about 1USD:106ZWL.

The surge in Zimbabwean banks loans and advances for the quarter period is attributable “to the translation of foreign currency denominated loans”. On the other hand, foreign currency denominated loans “accounted for 32 percent of total banking sector loans as at 30 September 2021,” notes the RBZ in its latest banking sector report.

Banking sector executives told Business Report yesterday that they had tightened lending criteria in a bid to root out the risk of non-performing loans while mortgages were also now being shifted to foreign currency denomination to guard against local currency fluctuation risks.

This has seen the Zimbabwe banking sector loan portfolio quality “remain strong” yielding non-performing loans to total-loans-ratio of 0.61 percent for the period under review. This is “against the generally acceptable international threshold of 5 percent,” according to the central bank.

The stable non-performing loans ratio and growth in loans and advances has been solidified by income growth for the Zimbabwean banks during the period. The RBZ said in its report that income growth during the nine months ended 30 September 2021 was largely attributable to non-interest income which accounted for 54.35 percent of total income.

Non-interest income also surged, “driven by fees and commissions due to increased transactional volumes on digital platforms in the wake of Covid-19, as well as initiatives by banking institutions to promote the use of plastic money” alternatives.

“The sector is very much prudent when it comes to loans and other advances such as mortgages where the focus is tilting towards foreign currency denomination. This helps to hedge against exchange losses,” said one banking sector executive.