Banks slash interest rates

HARARE - Zimbabwe's financial services institutions have slashed interest rates by more than 50 percent in compliance with the central bank’s directive.

Earlier this year, Reserve Bank of Zimbabwe (RBZ) governor John Mangudya announced that banks had to reduce their interest rates, which were in some cases over 30 percent, with effect from October 1, 2015.

In a snap survey conducted yesterday, it emerged most banks’ interest rates were now averaging 14,5 percent.

“After the RBZ directive, we had to lower our caps to comply. While this is not very ideal for us as the interest rates were to compensate for high credit risk issues associated with the market on the back of surging Non-Performing Loans (NPLs), we hope the credit registry will go live soon so that client vetting will help us give loans to legit clients to avoid NPLs,” said a local banker who spoke on condition of anonymity.

According to the central bank’s mid-term monetary policy statement, there was scope for reduction to ensure that lending rates were supportive of economic recovery.

“Within the broader policy to streamline costs of doing business and stimulate economic activity through affordable credit facilities in the domestic banking system, the following interest rate guidelines…have been agreed between the Bankers Association of Zimbabwe (BAZ) and the Reserve Bank,” Mangudya said.

The interest rate framework states that lending to productive sectors will range from six to 18 percent per annum, depending on the borrower’s risk profile.

Defaulting borrowers would be liable to a penalty rate of three to eight percent above the relevant lending rate, the central bank statement said.

Housing finance would attract rates ranging from eight to 16 percent per annum, while rates between 10 percent and 18 percent would apply to consumptive lending.

This review is expected to achieve the key objectives of stimulating aggregate demand, promote the resuscitation of industry, improve the cost of doing business and support sustained economic growth, according to Mangudya.

In a move to control credit risk, the RBZ is also creating a credit registry and a credit reference bureau unit within its bank supervision division.

The bureau will collect credit information from all banking institutions and microfinance institutions and serve as a databank for licensed private credit reference bureaus.

The credit reference bureau (CRB) is expected to solve some of the issues contributing to NPLs — with the RBZ saying the NPL ratio is expected to go down to the prudential regional benchmark of five percent by June next year from the current 14 percent.

Comments (3)

That is a bookish economist or banker speaking,we are trading in U.S dollar terms in Zim which is stable.these people were just used to excessive profeetering or rather daylight robbery compromising development and discouraging people from banking as there was no benefit for one to bank their money by then.right now we shall see a steadfast increase in formal banking with people regaining confidence in the financial system

carson macate - 6 October 2015

I hope Stanchart complies. Their rates are usually high.

Gogo - 7 October 2015

in USA where the $ is coming from, the interest rate is close to zero (0)

Samas - 7 October 2015

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