Categories: Stories

Liquidity crisis could be due to too many loans to individuals

Zimbabwe’s banks gave out US$3.70 billion in loans last year and nearly a quarter was given to individuals. This could be one of the reasons why the country is facing a liquidity crisis.

The Reserve Bank of Zimbabwe said 23.8 percent of the loans granted last year were to individuals while manufacturing, which should be the engine driver of the economy, only got 15.03 percent.

Services and agriculture -another key player to development- got slightly higher with services accounting for 18.42 percent and agriculture 15.12 percent.

Mining, which the country is currently relying on, got only 4.97 percent of the loans.

“The scenario where lending to individuals constitutes the highest proportion of total lending reflects attendant macroeconomic challenges currently experienced. In addition, this development exposes the structural fragilities in the sector, particularly in view of the consumptive nature of the lending and widespread deindustrialisation in the economy,” the central bank said.

Nearly 16 percent of the loans were bad debts.

(17 VIEWS)

Charles Rukuni

The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.

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