Zimbabwe Banking Sector Review (Part One)

Entrepreneurs build their businesses in an environment that they sometimes cannot control. The strength of business is tested and tested by the peripherals of the environment. There are forces in the environment that can serve as a great opportunity or a threatening threat to the survival of business. Entrepreneurs need to understand the environment in which they work in order to take advantage of new opportunities and help them cope with potential threats.
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This article is used to understand the forces and their impact on Zimbabwe’s banking entrepreneurs. A brief historical overview of Zimbabwe’s banking has been made. The impact of the regulatory and economic environment on the sector is assessed. Analysis of the structure of the banking sector contributes to the assessment of the major forces in the industry.
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Historical background

With independence (1980), Zimbabwe had a complex banking and financial market, with commercial banks largely foreign. The country had a central bank, inherited from the Central Bank of Rhodesia and Nyasaland at the time of the Federation’s liquidation.
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For the first few years of independence, the Zimbabwe government did not interfere with the banking industry. There was neither nationalization of foreign banks, nor restrictive legislative intervention on which sectors to finance, or interest rates charged, despite the socialist national ideology. However, the government purchased some of the shares in the two banks. He purchased 62% of the Rombank Nedbank at a fair price when the bank left the country.
This decision may have been motivated by a desire to stabilize the banking system. The bank was converted as Zimbank. The state did not interfere much with the bank’s operations. In 1981, the State also cooperated with the Bank of Credit and Commercial International Organizations (BCCI) as a 49% shareholder in a new commercial bank, the Credit and Commerce Bank of Zimbabwe (BCCZ). This was accepted and turned into the Zimbabwe Commercial Bank (CBZ) when the BCCI collapsed in 1991 on charges of unethical business practices.
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This should not be seen as nationalization, but in accordance with state policies to prevent the closure of companies. Subsequently, the shares of Zimbank and CBZ were diluted to below 25%.
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In the first decade, no indigenous banks were licensed, and there was no evidence that the government had any financial reform agenda. Harvey (n.d., p. 6) cites the following as evidence of the lack of a coherent financial reform plan in those years:
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– In 1981, the government said it would encourage rural banking services, but the plan was not implemented.
– In 1982 and 1983, a commission on money and finance was proposed, but it was not created.

– Until 1986, no financial reform program was mentioned in the Five-Year National Development Plan.

Harvey argues that the government’s tendency to interfere with the financial sector may be explained by the fact that it did not want to jeopardize the interests of the white population, which is an integral part of banking.
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The country was vulnerable to this sector of the population, as it controlled agriculture and production, which formed the basis of the economy. The state applied a conservative approach to indigenization when it learned from other African countries whose economies almost collapsed due to the forced eviction of the white community without first developing a mechanism for transferring skills and capacity-building to the black community.
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The economic cost of improper intervention was considered too high. Another plausible reason for the policy of non-interference was that the state, independently, inherited from its predecessor a highly controlled economic policy with rigid exchange control mechanisms. As foreign currency control had an impact on credit control, the government by default had strong control over the sector for both economic and political purposes; therefore, there was no need to intervene.
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Financial reforms

However, after 1987, the government, at the request of multilateral lenders, launched the Economic and Structural Adjustment Program (ESAP). Under this program, the Reserve Bank of Zimbabwe (RBZ) has begun to advocate for financial reforms through liberalization and deregulation. He argued that oligopoly in banking and lack of competition deprive sectors of choice and quality of services, innovation and efficiency. Thus, as early as 1994, the RBS Annual Report indicates a desire for greater competition and efficiency in the banking sector, which will lead to banking reforms and new legislation that would:
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– allow prudential supervision of banks in accordance with international best practice

– allow both bank audits and on-site audits to enhance RBS’s banking oversight and

– increased competition, innovation and improved customer service by banks.

Subsequently, the Registrar of Banks of the Ministry of Finance, in conjunction with the RBS, began to issue licenses to new players when the financial sector opened. From the mid-1990s to December 2003, the financial sector saw a surge in entrepreneurial activity when indigenous banks were established. The graph below shows the trend in the number of financial institutions by category, effective since 1994. This trend shows the initial growth of commercial banks and discount houses, with a further decline. Initially, commercial bank growth slowed, picking up around 1999. The decline of commercial banks and discount houses was due to their conversion, mostly to commercial banks.

Source: RBZ Reports
Different entrepreneurs have used various methods to penetrate the financial services sector. Some started providing consulting services, then went to commercial banks, while others set up branded brokerage firms, which they raised in discount houses.

From the beginning of the liberalization of financial services until about 1997. There is a noticeable absence of locally owned commercial banks. Some of the reasons for this were:

– Conservative licensing policy by the Secretary of Financial Institutions, as it was risky to license indigenous commercial banks without appropriate legislative authority and banking controls.
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– Banking entrepreneurs chose non-bank financial institutions because they were less costly both in terms of initial capital and working capital requirements. For example, a merchant bank requires fewer staff, does not need banking facilities, and will not need to make expensive small retail deposits, which will reduce overhead and reduce profit registration times. Thus, at this time, there was a rapid growth of non-banking financial institutions, for example. by 1995, five out of ten commercial banks had started operating within the previous two years. This has become the route of choice for commercial banking for some, e.g. Royal Bank, NMB Bank and Trust Bank.
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It was expected that some foreign banks would also enter the market after the financial reforms, but this was not likely due to a restriction on holding at least 30% of local equity. Strict controls on foreign currency could also play a role, as could the cautious approach taken by licensing authorities. Existing foreign banks were not required to divest part of their shares, although Barclay Bank did so by issuing them at a local exchange.

Harvey argues that financial liberalization implies that eliminating the lending direction implies that banks will automatically be able to lend on a commercial basis. But he argues that banks may not be able to do so because they are affected by the borrowers’ inability to lend because of exchange rate restrictions or price controls. Similarly, having positive real interest rates will usually increase bank deposits and increase financial intermediation, but this logic mistakenly assumes that banks will always lend more efficiently. He also argues that licensing new banks does not imply increased competition, since it implies that new banks will be able to attract competent management, and that banks’ legislation and supervision will be adequate to prevent fraud and thus prevent bank failures and the financial crisis. Unfortunately, his concerns do not seem to have been resolved in the framework of the reform of the Zimbabwean financial sector to the detriment of the national economy.

Operating environment

Any business activity is limited or promotes its operating environment. This section analyzes the predominant Zimbabwean environment that can affect the banking sector.

Political and legislative

The political environment in the 1990s was stable, but after 1998 it became unstable, mainly due to the following factors:

– extra-budgetary payments to war veterans after they attacked the state in November 1997. This greatly strained the economy, which led to the run for the dollar. As a result, the Zimbabwean dollar depreciated by 75% as the market anticipated the effects of the government’s decision. This day was recognized as the beginning of a severe decline in the country’s economy and was called “Black Friday”. This depreciation has been a catalyst for further inflation. After a month, there were violent food riots.

– poorly planned agrarian land reform, started in 1998, when white commercial farmers were allegedly evicted and replaced by blacks without proper consideration of land rights or compensation systems. This has led to a significant decline in the productivity of the country, which is largely dependent on agriculture. The way the land was redistributed has angered the international community, claiming that it is racially and politically motivated. International donors have withdrawn support for the program.

– an ill-advised military invasion called “Sovereignty of Operation” to protect the Democratic Republic of the Congo in 1998 resulted in enormous costs, without obvious benefit to itself and

– Elections, which the international community claims were rigged in 2000,2003 and 2008.

These factors led to international isolation, significantly reducing the inflow of foreign currencies and foreign direct investment into the country. Investor confidence has been greatly eroded. Agriculture and tourism, which are traditionally huge earners of foreign currency, have broken up.

For the first time decades after independence, the Banking Act (1965) was the main legislative base. As this was accepted when most commercial banks owned by foreign owners did not have any indication of prudential lending, domestic loans, share of shareholders’ funds that could be lent to one borrower, determination of risky assets and lack of reserves for bank checking.

The Banking Law (24:01), which came into force in September 1999, was the culmination of RBS’s desire to liberalize and deregulate financial services. This Law regulates commercial banks, commercial banks and discount houses. The bar’s entrances were eliminated, leading to increased competition. Deregulation has also allowed banks some latitude to operate in non-core services. It seems that this latitude was not sufficiently demarcated and therefore an opportunity was opened up for venture entrepreneurs. RBZ stands for this deregulation as a way to dismantle the financial sector and increase efficiency. (RBZ, 2000: 4). These two factors offered an opportunity for enterprising indigenous bankers to set up their own businesses in the industry. The law was revised and redesigned as Chapter 24:20 in August 2000. Increased competition has led to the introduction of new goods and services, for example. e-banking and banking. This entrepreneurial activity led to “deepening and sophistication of the financial sector” (RBZ, 2000: 5).

As part of its financial reforms, the Reserve Bank Act (22:15) was adopted in September 1999.

Its main purpose is to strengthen the Bank’s supervisory role by:

– setting prudential standards within which banks operate

– Observation of banks both outside and outside

– the imposition of sanctions and, where necessary, the placement of supervised and

– investigation of banking institutions where necessary.

The law was still flawed, as Dr. Tsumba, the then governor of the RBS, claimed that the RBS needed responsibility for both licensing and oversight, since “the ultimate sanction available for banking supervision is the knowledge of the banking sector that a license has been issued. will be canceled for gross misconduct. ” However, the government seems to have resisted this by January 2004. It can be argued that this shortfall could give some bankers the impression that their licenses will not happen. Dr Tsumba, observing the role of RBDs in managing banks, directors and shareholders responsible for the viability of banks, stated that this was neither a role nor an intention of RBBs to microbially manage banks and direct their daily operations.

It seems that the view of his successor was substantially different from that of the Orthodox view, hence the evidence of micro-governance observed in the sector since December 2003.

In November 2001, a policy of troubled and insolvent banks, developed over the past few years, came into force. One of his intended goals was that “the policy enhances regulatory transparency, accountability and ensures that regulatory measures are applied fairly and consistently.” The prevailing view in the market is that this policy, during its implementation after 2003, is certainly insufficient. as measured against these ideals. It is debatable how transparent the inclusion and exclusion of vulnerable banks was in the BWG.

The new RBS governor was appointed in December 2003, when the economy is in freefall. It has made significant changes to its monetary policy, which has caused the banking sector to shake. In January 2004, RBD was finally authorized to act as both a licensing authority and a regulatory body for financial institutions. The regulatory environment has been revised and significant changes have been made to the laws governing the financial sector.

The Problem Solving Financial Institutions Act (2004) was adopted. Due to the new regulatory environment, a number of financial institutions have experienced problems. RBZ placed seven institutions under curation, one was closed and the other was put under liquidation.

In January 2005, three of the troubled banks were consolidated by virtue of the powers of the Distressed Financial Institutions Act to create a new institution, the Zimbabwean Union Banking Group (ZABG). These banks allegedly failed to repay the funds advanced to them by the RBS. The affected institutions were Trust, Royal and Barbican. The shareholders appealed and won an appeal against the seizure of their assets, ruling that the Supreme Court had declared that the UGCC was trading illegally acquired assets. These bankers appealed to the Minister of Finance and lost their appeal. Subsequently, in late 2006, they went to court, as required by law. Finally, as of April 2010, the RBS finally agreed to return the “stolen assets”.

Another measure taken by the new governor was to force a change in management in the financial sector, as a result of which most of the founders of business banks were ousted from their own companies under different pretexts. Some eventually fled the country under threat of arrest. The banks’ boards were restructured.

Economic environment

Economically, the country was stable until the mid-1990s, but the recession began around 1997-1998, mainly because of political decisions made at the time already discussed. Economic policy was guided by political considerations. Thus, multinational donors were withdrawn and the country was isolated. At the same time, in the country of 2001-2002, the drought suffered from drought, which exacerbated the detrimental effect of farm eviction on the production of crop production. This decrease in production had a negative impact on banks that financed agriculture. Disruptions in commercial agriculture and the concomitant decline in food production have led to an unstable position in food security. In the last twelve years, the country has been forced to import corn, straining even less foreign currency resources.

Another impact of the agrarian reform program was that most farmers who borrowed money from banks were unable to service loans, but the government, which took over their business, refused to take responsibility for the loans. At the same time unable to promptly and fairly compensate farmers, it became impractical for farmers to service loans. Thus, banks were exposed to these bad loans.

Чистим результатом стала спіральна інфляція, закриття компаній, що призвело до високого рівня безробіття, дефіциту іноземної валюти, оскільки міжнародні джерела коштів вичерпалися та дефіцит продовольства. Дефіцит іноземної валюти призвів до дефіциту палива, що, у свою чергу, зменшило промислове виробництво. Отже, валовий внутрішній продукт (ВВП) зменшується з 1997 року. Це негативне економічне середовище означало зменшення банківської діяльності, оскільки промислова діяльність знижувалася, а банківські послуги були спрямовані на паралельний, а не на формальний ринок.

Як показано на графіку нижче, інфляція зросла спіраль і досягла піку 630% у січні 2003 року. Після короткого виправлення тенденція до зростання продовжувала зростати до 1729% до лютого 2007 року. Після цього країна в мирний час вступила у період гіперінфляції. періоду. Інфляція наголошує на банках. Деякі стверджують, що рівень інфляції зріс, оскільки девальвація валюти не супроводжувалася скороченням дефіциту бюджету. Гіперінфляція змушує процентні ставки зростати, тоді як вартість заставної застави падає, що призводить до невідповідності активів та пасивів. Це також збільшує неподаткові позики, оскільки більше людей не надають свої позики.

Насправді, до 2001 року більшість банків прийняли консервативну стратегію кредитування, наприклад. загальний обсяг авансів для банківського сектора становив лише 21,7% загальних активів галузі порівняно з 31,1% у попередньому році. Банки вдалися до нестабільних непроцентних доходів. Деякі почали торгувати на паралельному ринку іноземної валюти, часом уступаючи в змову з RBZ.

В останній половині 2003 року спостерігався сильний дефіцит грошових коштів. Люди перестали користуватися банками як посередниками, оскільки вони не були впевнені, що зможуть отримати доступ до своїх готівкових коштів, коли їм це буде потрібно. Це зменшило базу депозитів для банків. Через короткостроковий строк погашення депозитної бази банки, як правило, не в змозі інвестувати значну частину своїх коштів у довгострокові активи та, таким чином, були високоліквідними до середини 2003 року. Однак у 2003 році через попит клієнтів на прибуток, що відповідає інфляції, більшість корінних банків вдалися до спекулятивних інвестицій, що дало більш високу прибутковість.

Ця спекулятивна діяльність, головним чином, щодо непрофільних банківських операцій, сприяла експоненційному зростанню у фінансовому секторі. Наприклад, один банк збільшив свою базу активів із 200 мільярдів доларів (50 мільйонів доларів США) до 800 мільярдів доларів (200 мільйонів доларів США) протягом одного року.

Однак банкіри стверджують, що те, що губернатор називає спекулятивним непрофільним бізнесом, вважається найкращою практикою у більшості прогресивних банківських систем у всьому світі. Вони стверджують, що незвично для банків займати позиції в капіталі в небанківських установах, вони позичили гроші для захисту своїх інвестицій. Наведено приклади таких банків, як Nedbank (RSA) та J P Morgan (США), які контролюють великі інвестиції в нерухомість у своїх портфелях. Банкіри переконливо стверджують, що ці інвестиції іноді використовуються для захисту від інфляції.

Доручення нового губернатора РБЗ для банків відмовитись від своїх позицій протягом ночі та негайне відкликання RBZ підтримки на ночівлю для банків стимулювали кризу, яка призвела до значних невідповідностей активів та пасивів та скорочення ліквідності для більшості банків . Ціни на нерухомість і Зімбабве фондова біржа знизилися одночасно, через масові продажі банками, які намагалися прикрити свої позиції. Втрата вартості на ринку цінних паперів означала втрату вартості застави, яку більшість банків мали замість позик, які вони надавали.

Протягом цього періоду Зімбабве залишався в кризі заборгованості, оскільки більшість його зовнішніх боргів були або не обслуговувані, або недостатньо обслуговувалися. Внаслідок цього погіршення платіжного балансу чинив тиск на валютні резерви та завищену валюту. Загальний внутрішній борг уряду збільшився з 7,2 млрд. Дол. США (1990 р.) До 2,8 трлн. Дол. США (2004 р.). Таке зростання внутрішнього боргу зумовлене високим бюджетним дефіцитом та скороченням міжнародного фінансування.


Через мінливу економіку після 90-х років населення стало досить мобільним, значна кількість професіоналів емігрувала з економічних причин. Інтернет та супутникове телебачення зробили світ справді глобальним селом. Клієнти вимагали того ж рівня досконалості сервісу, якому вони піддавалися в усьому світі. Це зробило якість обслуговування диференційною перевагою. Був також попит на банки вкладати значні кошти в технологічні системи.

Зростаючі витрати на ведення бізнесу в гіперінфляційному середовищі призвели до високого рівня безробіття та супутнього краху реального доходу. Як настільки ретельно зауважив Зімбабве Незалежний (2005: B14), прямим результатом гіперінфляційного середовища є “те, що заміщення валюти є реальним, що означає, що долар Зімбабве відмовляється від функції функціонування сховища вартості, розрахункової одиниці та засобу обміну” “до стабільніших іноземних валют.

У цей період виник заможний корінний сегмент суспільства, який був багатим готівкою, але уникав опікувань банків. Паралельно ринок іноземної валюти та грошових коштів, що виникає, під час кризи готівки посилював це. Ефективно це зменшило клієнтську базу для банків, тоді як більше банків виходило на ринок. Таким чином, існувала агресивна конкуренція в умовах зменшення ринку.

До соціально-економічних витрат, пов’язаних з гіперінфляцією, належать: ерозія паритету купівельної спроможності, підвищена невизначеність у бізнес-плануванні та бюджеті, зменшення наявного доходу, спекулятивна діяльність, яка відволікає ресурси від виробничої діяльності, тиск на внутрішній обмінний курс через збільшення попиту на імпорт та погану віддачу на заощадження. У цей період для збільшення доходу було посилено транскордонну торгівлю, а також товарообіг людей, які імпортували з Китаю, Малайзії та Дубаї. Це фактично означало, що імпортні замінники місцевої продукції посилювали конкуренцію, негативно впливаючи на місцеві галузі.

Оскільки більше банків вийшло на ринок, який зазнав значного відтоку мозку з економічних причин, це стало причиною того, що багато недосвідчених банкірів були кинуті в глибокий кінець. Наприклад, засновники директора ENG Asset Management мали менше п'яти років досвіду роботи у сфері фінансових послуг, але все ж ENG була найбільш швидкозростаючою фінансовою установою до 2003 року. Припускається, що її провал у грудні 2003 року був зумовлений юнацьким завзяттям, жадібністю та відсутністю досвід. Крах ENG вплинув на деякі фінансові установи, які були піддані цьому фінансово, а також викликав політ вкладників, що призвело до краху деяких корінних банків.