HAVING started my professional career in commercial banking before transitioning into investment banking, I find it essential to reflect on the state of banking institutions in Zimbabwe.
This includes examining their relationship with macro-economic challenges, how most banks have managed to stay operational, and what the future holds for the sector.
The 1990s saw the emergence of black-owned and owner-managed banks in Zimbabwe. During this period, notable institutions such as Kingdom Bank (founded by Nigel Chanakira and partners in 1994), Time Bank (established in 1997 by Chris Tande), and TN Bank (founded in 2001) entered the market.
TN Bank, under Tawanda Nyambirai, later became a 100% subsidiary of Econet Wireless in 2012 as part of a strategic move that secured him an ownership stake in Econet, where he had served as chairperson for a decade.
Fast forward to today, Nyambirai has returned to the banking sector, acquiring a controlling stake, with 25% in Steward Bank pending regulatory approval.
He has promised significant reforms, describing the bank as financially weak and burdened by an oversized workforce. Following his appointment, all directors were reshuffled except for Tsitsi Masiyiwa and Dominic Musengi.
However, these changes negatively impacted EcoCash Holdings' share price, which plummeted from ZiG26 to ZiG16 by the end of February. Beyond Steward Bank, the broader banking sector has also faced structural shifts.
In January, CBZ retrenched 347 employees due to prevailing macroeconomic challenges, reflecting the sector’s struggles in an unstable environment.
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Banking sector hurdles
The banking and financial services industry remains the backbone of the formal economy. However, the rise of the informal sector has forced banks to shift their revenue models.
Many now rely more on non-funded income (fees and commissions) rather than traditional lending. This is largely because lending in a hyperinflationary environment result in losses, as borrowers repay loans at interest rates that fail to keep up with inflation.
Banks operate using capital (which must meet a minimum threshold set by the central bank) and deposits from surplus units, which are then used to extend loans.
However, most banks have reduced lending in local currency due to its volatility. Instead, they are investing heavily in property and foreign-denominated assets, leading to artificial growth in financial statements when reported in local currency.
For example, First Capital Bank reportedly grew its asset base by 124% in the nine months leading to October 2024. However, this was primarily due to increased foreign currency holdings rather than real business expansion.
The bank was not affected by the 43% ZiG devaluation in September because its assets were largely in foreign currency.
Shift towards fintech
Traditional banking in Zimbabwe is facing growing competition from fintech players such as EcoCash and InnBucks, which appeal to small businesses and the unbanked population.
The famous saying by Benjamin Graham — “Banking is necessary, but banks are not” — is becoming more relevant as alternative financial services gain traction.
Banks have also been reluctant to lend to small to medium enterprises (SMEs) in the informal sector, where real US dollars are exchanged daily. Microfinance institutions have attempted to fill this gap, but high interest rates and onerous requirements have limited their effectiveness.
The reluctance of banks to engage with the informal sector suggests that traditional banking models must evolve to stay relevant.
Government policies impact
The Reserve Bank of Zimbabwe (RBZ) has implemented several policies to stimulate banking activity. Recently, it scrapped monthly charges for accounts with balances equivalent to US$100 or less, removed transaction fees for amounts below US$5 and increased interest rates on savings accounts for both US$ and ZiG deposits.
While these measures may encourage deposits, they are unlikely to immediately restore faith in the financial system. Confidence in banks depends not only on policies but also on economic stability and clarity on convertibility of currency.
The RBZ launched a ZiG600 million concessional loan facility to support productive sectors such as agriculture, manufacturing, and retail. While this may increase banks’ willingness to lend in local currency, it does not necessarily rebuild confidence in the system.
The current stability is largely artificial, driven by scarcity and regulatory measures providing ZiG liquidity on certain sectors over others.
Meanwhile, the US dollar continues remaining the preferred currency across all industries, unlike the ZiG.
Lessons from past, road ahead
Looking back, the collapse of black-owned banks between 2003-2004 and 2008-2015 highlighted the challenges faced by owner-managed financial institutions.
While owner-managed banks often perform better than those run by external managers — since the chief executive officer (CEO) will be having a skin in the game — market sentiment toward Nyambirai’s return to banking has been lukewarm.
Investors seem to be taking a wait-and-see approach, likely due to past failures of black-owned banks, the current struggles of the banking sector as a whole and some lingering trust issues surrounding TN since under TN Holdings, only TN Asset management seem to be the only segment widely known to have performed well.
Final thoughts
Despite the macroeconomic challenges, the banking sector still presents opportunities, especially for those willing to innovate beyond traditional models.
Serving the unbanked and informal sector could unlock new revenue streams, but it requires strategic shifts in banking operations.
Nyambirai’s leadership at Steward Bank will be closely watched, and his success or failure could shape perceptions of the future of owner-managed banks in Zimbabwe.
If he has learned from others’ past mistakes, his reforms could set a new precedent. If not, history may repeat itself. Only time will tell.
Taimo is an investment analyst with a talent for writing about equities and addressing topical issues in local capital markets. He holds a First Class Degree in Finance and Banking from the University of Zimbabwe. He is an active member of the Investment Professionals of Zimbabwe community, pursuing the Chartered Financial Analyst charter designation.
