Barclays Plc and Standard Chartered Plc are among banks being asked to curb lending rates in Zimbabwe as the government pressures the financial services industry to aid economic recovery.
A draft agreement between 23 banks and the Reserve Bank of Zimbabwe, a copy of which has been obtained by Bloomberg, stipulates that lending rates cannot be more than 10 percentage points above the companies’ cost of financing, which currently ranges between 1 percent and 7 percent while banks charge lending rates of as much as 25 percent.
There is a need to ensure “that bank charges and interest rates promote financial inclusion, stability and economic growth,” the central bank and the banks say in the agreement, which is yet to be ratified. the Bankers Association of Zimbabwe met with Tendai Biti, the finance minister, to discuss the agreement on Jan. 4.
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.
In that year Biti abolished the use of the Zimbabwe dollar in a bid to curb inflation that had accelerated to 500 billion percent, according to estimates by the International Monetary Funds. The country now predominantly uses the U.S. dollar.
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 over $1,000 and to design accounts with lower charges to cater for poorer customers. Zimbabwe’s annual inflation rate was 3 percent in November.
“The matter is still under discussion and we hope it will be finalized soon,” said George Guvamatanga, the president of the bankers association. Calls to the Harare-based central bank went unanswered while Biti was said to be unavailable.
Stanbic Bank of Zimbabwe Ltd., a unit of Johannesburg-based Standard Bank Group Ltd., is included in the agreement as are units of Nedbank Group Ltd., Ecobank Transnational Inc. and Old Mutual Plc. Barclays Bank of Zimbabwe Ltd. is the biggest bank by market value on the Zimbabwe stock exchange. Its stock declined 35 percent since the beginning of last year to 28 cents as of the close today.
Four banks hold about 80 percent of deposits in Zimbabwe, Biti said in his Nov. 15 budget speech, without naming them.
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.