Banks are ready to lower lending rates

ZIMBABWEAN banks are prepared to lower lending rates and bank charges but are unlikely to meet recommendations by fiscal  and monetary authorities. Banking sources said while no agreement had yet

been reached between the authorities and the Bankers' Association of Zimbabwe, there was a "common understating" between them on the need to cut lending rates and bank charges.

Both sides insist that all this would be achieved in a manner which "does not compromise the financial stability" of the institutions.

The authorities want to cap the interest rate at 10 percent, according to media reports, while banks are prepared to charge lending rates of as much as 15 percent.

"The banks have agreed to reduce certain bank charges and lending rates to 15 percent," said a source close to the talks.

"BAZ is definitely trying to compromise. But it also wants the Government to play its part in improving the image of the country, to reduce the political risk that has seen regional financial institutions advancing lines of credit to local banks at high interest rates," said the source.

Institutions such as the PTA Bank and Afreximbank are providing lines of credit to local financial institutions at an average annual rate of 8 percent.

"What the banks are demanding from the Government is to make the environment conducive for the banks to raise lines of credit at competitive rates," said the source.

BAZ president Mr George Guvamatanga said this week "the matter is still under discussion and we hope that it will be finalised soon".

Last week, the National Social Security Authority and Old Mutual reduced the cost of money lent to banks from 10 percent to 7 percent, with banks now on-lending that money at a maximum interest rate of 10 percent per annum.

Before the reduction, the banks were on-lending the money at a maximum rate of 15 percent per annum. Many banks obtain significant funds from the two institutions.

Minister Biti said last November that he had negotiated with NSSA and Old Mutual to reduce the cost of funds lent to banks so that they too could cut their lending rates.

He said 40 percent of internally generated money came from Old Mutual and NSSA. The banks should, therefore, not on-lend the money at a rate exceeding 10 percent.

But the bankers said while the rates had been reduced, the money itself might be very difficult to find.

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