Appetite for lending by Zimbabwean banks is waning. A look at the overall banks\u2019 loan-to-deposit ratio (LDR) since 2015 shows a declining trend.<\/p>\n
The loan-to-deposit ratio, as its name suggests, is the ratio of a bank\u2019s total outstanding loans for a period to its total deposit balance over the same period. So a loan-to-deposit ratio of 100% indicates that a bank lends a dollar to customers for every dollar that it brings in as deposits.<\/p>\n
Typically, the ideal loan-to-deposit ratio is 80% to 90%.<\/p>\n
Looking at data from the central bank, LDR has been going down from a high of 86,07% in 2015 before tumbling to 56,64% in 2016. In December 2017 it took a nosedive to 44,81%, before plunging to 40,71% in December 2018. Last year it further dropped 36,6%.<\/p>\n
Total bank deposits in 2015 amounted to $5,62 billion, and grew to $6,51bn in 2016 before going up to $10,32bn in 2018 from $8,48bn in 2017. Last year deposits were $34,50bn.<\/p>\n
The figures also show that the appetite to lend by banks was relatively high during the dollarisation era. Worryingly though, during the same period non-performing loans (NPLs) became the order of the day.<\/p>\n
Information at hand shows that as banks\u2019 lending appetite was fizzling out, NPLs were going down in similar fashion. NPLs were 10,82% in 2015, slowed to 7,87% in 2016, went down to 7,08% in 2017,and was 8,39% in 2018 before tumbling to 1,75% last year.<\/p>\n
It can be argued that there is a relationship between lending growth and exposure to loans defaults, but to some extent the decline in loan disbursements has repercussions on the productive sector which needs funding for capital projects.<\/p>\n
More so, the waning in bank loans has also seen banks\u2019 traditional source of revenue net-interest income plummeting. Net interest income typically includes commercial and personal loans, mortgages, construction loans and investment securities.<\/p>\n
As banks shift from relying on loans as their traditional source of revenue they incline to new digital ways of generating income. Banks are now getting revenue through non-interest income being derived primarily from fees including deposit and transaction fees, insufficient funds fees, annual fees, monthly account service charges, inactivity fees, check and deposit slip fees<\/p>\n","protected":false},"excerpt":{"rendered":"
Appetite for lending by Zimbabwean banks is waning. A look at the overall banks\u2019 loan-to-deposit ratio (LDR) since 2015 shows a declining trend. The loan-to-deposit ratio, as its name suggests, is the ratio of a bank\u2019s total outstanding loans for a period to its total deposit balance over the same period. So a loan-to-deposit ratio […]<\/p>\n","protected":false},"author":84,"featured_media":8570,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3,6],"tags":[679,1095],"class_list":{"0":"post-20261","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-all-news","8":"category-economy","9":"tag-central-bank","10":"tag-foreign-direct-investment"},"yoast_head":"\n