History of the Banking Idustry in Zimbabwe

3381 Words Jun 27th, 2009 14 Pages
The History of the Banking Industry in Zimbabwe
It is important to analyse and evaluate the banking structure in Zimbabwe for us to appreciation how IT will really fit in. The Zimbabwe’s Banking sector is relatively sophisticated, consisting of the Reserve Bank of Zimbabwe, Discount Houses, Commercial Banks, Merchant Banks, Finance Houses, Building Societies and The Post Office Savings Bank. The development of the Zimbabwean banking sector can be analysed within three separate periods, which the banking industry went through different development phases.

PRIOR 1991 PERIOD
The financial system in Zimbabwe inherited a regulated environment and it has for years pursued segmented or specialised funding. For instance merchant banks were
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It was hoped that this free entry of new firms would lead to complete breakdown of the cartels and facilitate desegmanation. Financial reforms included among other things the removal of restrictions for new entrants, demise of financial institutions cartels, removal of impediments for competition between financial institutions and loosening of product segments. The main thrust of financial liberalisation in Zimbabwe is on loosening the restrictive laws that tended to stifle or limit the scope of activities that financial institutions could venture into.

Impact of Deregularisation
During this period the banking sector was hailed as the most successful industry in
Zimbabwe up to 2003. The collapse of United Merchant Bank in 1998 did not have much impact on the industry. The RBZ increased the capital adequacy requirement for banks to avoid further negative impact on the industry.

Increase in number of banks
Deregulation of the banking industry increased the number of banks in the industry.
Commercial Banks increased to 17
Merchant Banks increased to 6
Discount Houses increased to 9
Building Societies increased to 6
Some authorities argued that Zimbabwe was now over banked. This implies that the economy might end up having more banks than required for its services. This may lead to underutilisation of resources such as labour and capital assets. The running costs became higher and banks cannot survive by passing costs to customers.

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