Informal sector does not bank money

RESERVE Bank of Zimbabwe governor John Mangudya says half the population and 50% local companies do not bank their money resulting in the country experiencing a severe liquidity crunch.

MTHANDAZO NYONI
OWN CORRESPONDENT

Mangudya said chief among them were those operating in the informal sector that instead preferred to keep their money “under mattresses” leaving banks with unstable deposits.

“The problem is that people don’t bank. We know that about 40% to 50% are not banked and this is, therefore, the reason why we don’t get money in the banks.

“I know my brothers from the commuter omnibus associations that a bulk of them don’t bank. That I know; it’s a fact,” Mangudya said.

According to the Finscope SMEs survey, up to $4 billion is thought to be circulating outside the formal banking system.

The study also noted that the bulk of Zimbabwe’s urban population is involved in the informal sector, accounting for about 24% of the country’s $10,81 billion gross domestic product, which remains largely unbanked.

Furthermore the SMEs sector was found to have created nearly six million jobs in the country and generates about $7,4 billion annually, but the money rarely finds its way into the formal banking system.

Mangudya warned distressed financial institutions to improve their operations before June or face closure.

Most banks have been struggling to meet capitalisation requirements and are experiencing service delivery challenges.

The current minimum capital requirement is $25 million, but is set to be increased to $100 million by 2020.

Our Partners:   NewsDay   The Independent   TheStandard  MyClassifieds