Home » Industry » Malaba to Prioritise Confidence in Banks

Senior business reporter Golden Sibanda (GS) had an interview with new Bankers Association of Zimbabwe president Mr Sam Malaba (SM) on issues regarding the banking sector including investment, interest rates, capitalisation and non-performing loans among others. Below are some of the excerpts of the issues that were discussed.

(GS) As the new president of the Bankers Association of Zimbabwe, what do you think are the priority issues that need to be addressed?

(SM) I think the key issues we need to address, are restoration of confidence in the banking sector and ensuring that we implement measures to enhance that confidence.

This of course means that as BAZ we will be working closely with the Ministry of Finance and with the RBZ. Already we have a very close working relationship and we are very happy with the measures that were introduced by the Minister of Finance in his budget statement to restore confidence in the banking sector and those measures will be buttressed by measures introduced by the Reserve Bank in the monetary statement.

(GS) What are the outstanding issues that still need to be addressed?

(SM)The outstanding issues include the capitalisation of the RBZ, the issue of the lender of last resort, the issue of the operationalisation of the interbank market in terms of the Afreximbank facility and also issues in relation to the proposed amendments to the Banking Act. There also are issues with regards to dealing with non-performing loans through the creation of a Special Purpose Vehicle and also the issue of the establishment of the national credit reference bureau. These are some of the issues that I think need to be addressed (urgently). But as (new) BAZ president and also within the Zim-Asset programme, the banking sector has a key role to play with regard to the mobilization of resources and we are very active within the clusters identified in Zim-Asset and also within the framework of the National Economic Consultative Forum where we participate and chair some of the task forces.

(GS) Could you please elaborate on the issue of the special purpose vehicle for the banking sector? This was suggested a long time ago, why has the establishment of the special purpose vehicle not progressed?

(SM) I think it is progressing well on the contrary. Just recently, I was talking to the banks’ supervisor and he was informing me that they have since written to the Minister of Finance and Economic Development with a proposal on how the special purpose vehicle should be set up. The issue basically relates to how you fund the special purpose vehicle, this is where the challenge has been.

(GS) Are there any suggestions on how this SPV would be set up?

(SM) Well, they have made proposals to the Minister and once they have discussed, they will come back to us. They want to get guidance from the minister before they give us the proposals.

(GS) You made reference to the issue of the banks’ role in mobilising financial resources to improve liquidity in the economy. How would you suggest that this be done?

SM) Basically, within the financial sector, our role is to try and mobilise lines of credit and that financial institutions support productive sectors with financing. We support agriculture, mining manufacturing in fact all the key productive sectors, we should try and avail credit through mobilising resources, whether they are portfolio resources, foreign direct investments or lines of credit.

(GS) Could you please further elaborate on mobilisation of financial resources through portfolio investments?

(SM) The biggest challenge basically relates to the fact that we are highly indebted. As you know, our level of foreign debt is about $6,4 billion and our indebtedness to multilateral institutions is about $2,4 billion.

Therefore, for us to access international funding we need to deal with our arrears situation and the way to deal with the arrears situation is to implement the International Monetary Fund’s staff monitored programme and then go into negotiations with the multi-lateral institutions to clear the arrears and we would have to also deal with bilateral creditors and other creditors.

Only when you have done that, will you be in a position to get meaningful portfolio lines of credit into the economy.

(GS) Obviously one of the critical issues for banks is the issue of minimum capital requirements. What are your thoughts on the capital thresholds and the minimum capital compliance process?

(SM) I think those concerns were adequately addressed in terms of the then acting Governor’s statement that the threshold would remain $25 million until 2020 and that they will only increase to $100 million after 2020.

So I think basically, the banking sector is happy with the certainty that has been brought by the pronouncement and that there is adequate time for banks to build up their (minimum) capital to $100 million by 2020, as such we do not have any problems with that.

(GS) As BAZ president how do you think such capital levels help to improve the performance of the sector or its role as the intermediary for financial support to the economy?

(SM) The balance sheet size of a bank, which is based on capital means that the ger your balance sheet is, the ger your bank is and the ger your bank is, the easier it becomes for you to attract lines of credit to fund the productive sectors of the economy.

(GS) There have been reservations from Government and public on interest rates. What are your thoughts on the levels of interest rates prevailing in the banking sector? And do you believe the levels are sustainable for Zimbabwe?

(SM) I am happy that we found it unnecessary to continue with a Memorandum of Understanding and that industry should self regulate and that is the way it should be.

We believe as banks we will also be responsible in the interest rates that we charge, taking into account the different cost factors. At times people try and compare interest rate in Zimbabwe and those in the region, people do not realize that one of the biggest challenge is that we do not have our own currency and we are importing currency. We import that currency at a cost to the banks due to insurance, freight and we also have other cost factors, which may be higher than those in the region. These include utilities. For all our branches we need to make sure that we have power generators and we have to provide water for our staff. There are a lot of factors that mean we may not be comparable to the region.

Source : The Herald