Zimbabwe’s Central Bank Governor Gideon Gono said some lenders are cutting interest rates and bank charges to comply with an agreement signed in January.
“It is heartening to note that some banks have already started to lower interest rates and bank charges,” Gono said today at a meeting hosted by the Confederation of Zimbabwe Industries in the capital, Harare. “Banks are also adjusting interest rates on deposits upwards as stipulated in the Memorandum of Understanding.”
An interest margin of no more than 12.5 percentage points above the banks’ cost of financing will ensure lending rates are probably less than 20 percent, Gono said. That “compares favorably” with lending rates in excess of 30 percent that prevailed since Finance Minister Tendai Biti abandoned the Zimbabwe dollar in 2009 to curb inflation, he said.
The Reserve Bank of Zimbabwe and the Bankers’ Association of Zimbabwe, whose members include the local units of Barclays Plc (BARC) and Standard Chartered Plc (STAN), reached an agreement on interest rates and bank charges on Jan. 31. Under the terms of the agreement, banks will also be compelled to pay an interest rate of at least 4 percent on term deposits of more than $1,000 and to design accounts with lower charges for poorer customers.
The pressure to lower interest rates comes after Biti said in November that the country could amend its banking laws after central bank attempts to restart the country’s capital markets by selling Treasury bills for the first time since 2008 were shunned by financial institutions. A decade-long recession ended in 2009 when neighboring countries forced President Robert Mugabe and Prime Minister Morgan Tsvangirai to end a political dispute by forming a coalition government.
Other African countries have sought to reduce lending rates by banks in recent months. On Dec. 21 Zambia capped lending rates at 18.25 percent for banks including a unit of London- based Barclays.
Two or three banks are struggling to raise the $25 million required by end of December to meet part of $100 million capitalization, Gono said today.
“In practice, there would be no penalties on a bank that fails to get the $25 million,” Gono said. “There are opportunities to downgrade that institution to a micro finance institution.”
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