TIGHT LIQUIDITY HITS BANKS

 THE banking sector experienced tight liquidity on both dollar and Kwacha in the last half of 2015 which reduced their to extend credit and funding to existing pipelines, says Bankers Association of Zambia (BAZ) chief executive officer Leonard Mwanza.

Mr Mwanza said interest rates in 2015 remained constrained due to the cap on lending which was at 24.5 percent.

He explained that interest rates started  free floating and aligned to the cost of funds from  November,3 2015 when cap on lending which was at 24.5 percent was lifted.

“Despite the resilience the sector continued to experience tight liquidity on both dollar and Kwacha especially in the last half of the year which has reduced the capacity of banks to extend credit and funding to existing pipelines,” he said.

Mr Mwanza said while lifting of the cap was good news for banks, the cost of borrowing would rise much to the disadvantage of customers and this could lead to slow down in credit appetite and inability to meet repayment obligations by others.

“While this is good news for banks, the cost of borrowing will increase to customers and this could lead to slow down in credit appetite and inability to meet repayment obligations by others,

“The Kwacha came under intense pressure between August and November, 2015, largely as result of the high demand of dollars against low supply,” he said.

He explained that at a time the kwacha came under pressure, a number of customers opted to shift their Kwacha balances to dollar accounts which resulted into an increase in dollar deposits in the market.

Mr Mwanza said like any other business in Zambia, the banking sector was feeling the pain resulting from increased load shedding which increased the price of goods and services.

He also said the Banking sector accounted for over 90 percent of financial systems assets in Zambia and remained resilient.

He said despite heavy economic head winds, the sector continued to effectively play its role of financial intermediation through the provision of various cash and card based products and services tailored to meet individual needs

“The Banking sector accounted for over 90 percent of financial systems assets in Zambia and remained resilient, and health and continued to effectively play its role of financial intermediation,

“Despite heavy economic head winds which affected the Zambian economy, especially in the last half of the year, the banking sector continued to play its role” he said.

Categorized | Business

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