Banking sector credit plunges

HARARE - Banking sector credit growth has continued on a downward trajectory, after dropping to 16,4 percent at the end of May 2016 from the 23,8 percent recorded the previous month, the central bank has said.

The Reserve Bank of Zimbabwe (RBZ) said local financial institutions continued to tighten their lending criteria in light of high risks in the country on the back of deteriorating economic conditions.

“Month-on-month, domestic credit grew by 0,1 percent, from $5 623,6 million in April 2016, to $5 627,8 million in May 2016,” the apex bank said in its May monthly economic review.

The central bank said on an annual basis, credit to the private sector declined by 4,4 percent to $3,5 million in May 2016, from $3,7 million in May 2015.

“Similarly, monthly credit to the private sector decreased by 1,1 percent in May 2016. In terms of proportions, credit to the private sector consisted of loans and advances, 85,3 percent; mortgages, 11,3 percent; other investments, 2,9 percent; bankers acceptances, 0,3 percent; and bills discounted, 0,2 percent,” RBZ said.

During the period under review, 23,9 percent of outstanding credit to the private sector went towards households as 19,2 percent was channelled towards agricultural usage, manufacturing got 16,1 percent of the share while services claimed 14,7 percent.

Of the remaining amount, 13,1 percent went towards distribution, 5,3 percent serviced the mining sector while financial organisations and investments got 2,9 percent with transport and communications claiming 2,9 percent of the outstanding credit.

The construction sector got the least credit after receiving 1,5 percent of the outstanding credit to private players.

Private sector credit was channelled towards working capital, as 35,5 percent went towards  inventory build-up, consumer durables accounted for 34 percent of the capital with 15,7 percent going towards fixed capital investment.

Meanwhile, annual money supply growth was lower at 12,5 percent in May 2016, compared to 12,8 percent in April 2016.

“On a month-on-month basis, broad money supply grew by 0,9 percent, from $5 004,9 million in April 2016, to $5 050,9 million in May 2016,” RBZ said.

The apex bank noted that the growth in money supply reflected annual increases of 30 percent and 10,2 percent in demand and savings deposits, respectively.

“Partially offsetting the increases were declines in deposits of over 30 days tenor, 8,5 percent; and under 30-days tenor, 6,4 percent.

“The proportions of deposit classes in broad money were as follows: demand, 53,7 percent; over 30-days, 16,9 percent; under 30-days, 15,7 percent; and savings deposits, 13,8 percent,” said RBZ.

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