By ETimes

Banks this year have continued with their trend of loaning more to the agriculture sector than other sectors as they view it as low risk lending. This has led to the sector getting 31 percent of the total loanable funds in the banking sector.

For the nine months to September 2021, the sector has been loaned $301,9 million with the other eleven sectors getting $672,5 million of the total $974 million loaned out in the nine months. This was revealed by the Reserve Bank of Zimbabwe in their latest monthly economic review for the month of September 2021.

The Banking Sector and micro finance houses have been financing agriculture through direct loans to farmers and indirectly through loans to value chain players such. Most commercial banks have a specialised agriculture unit within their operational structures complemented by quite a number of non-governmental and developmental finance organizations actively involved in funding small holder farming projects across the country.

Agriculture has been on a recovery trajectory, with the sector seeing more farmers getting into horticulture and some recapitalising their operations on the back of a good rainy season. This has seen banks offering even USD loans to the sector as some of the farmers targeting the export industry with blue berries, macadamia nuts among other fruits such as avocadoes.

The sector provides employment and income for an estimated 70 percent of the population, whilst supplying 60 percent of the raw materials required by the industrial sector. Agriculture contributes as much as 40 percent of total export earnings. The Agriculture sector directly contributes between 15 percent and 19 percent to annual GDP. This underscores the significance and importance of the agricultural industry and why its success is important.

Total banking sector loans and advances increased by 22.98 percent from $142.79 billion as at June 30, 2021, to $175.60 billion as at September 30, 2021, largely attributed to the translation of foreign currency denominated loans.

Foreign currency loans accounted for 32 percent of total banking sector loans as at 30 September 2021.
The level of banking sector financial intermediation has remained moderate as reflected by the loans to deposits ratio of 46.87 percent as at September 30, 2021, which registered a marginal increase from 45.84 percent reported as at June 30, 2021.

Bank loans have been mostly to the productive sector as it accounted for 80,89 percent of the loans, consumptive borrowing took 17,35 percent and other sectors accounted for 1,76 percent of loans.

The Banking Sector and micro finance houses have been financing agriculture through direct loans to farmers and indirectly through loans to value chain players such. Most commercial banks have a specialised agriculture unit within their operational structures complemented by quite a number of non-governmental and developmental finance organizations actively involved in funding small holder farming projects across the country.

Banks have previously said the industry lends only to corporate clients of high repute and to the employees of these companies. The absence of a credit bureau in Zimbabwe has also made profiling of borrowers difficult.

The banking sector loan portfolio quality remained strong with the nonperforming loans (NPLs) to total loans ratio of 0.61 percent as at September 30, 2021, against the generally acceptable international threshold of 5 percent.

The Reserve Bank continues to utilize its early warning system framework to closely monitor developments in the banking sector’s credit risk exposures – Harare

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