Source: ZiG loan to deposit ratio jumps to 46pc – herald
Business Reporter
THE Zimbabwe Gold (ZiG) loans-to-deposit ratio (LDR) has surged from 30 percent at its launch last year to 46 percent presently, the ZiG loan to deposit ratio jumps to 46pc(RBZ) has said.
The ZiG was introduced on April 5, 2024, replacing the inflation-worn Zimbabwe dollar, the country’s sixth local currency launch since 2008.
It was introduced as a “structured currency” backed by a composite basket of reserves, including foreign currency and precious metals, primarily gold.
Part of the broad objective was recalibrating the monetary policy to re-anchor exchange rate stability, which had been undermined by hyperinflation.
The loans-to-deposit ratio is a banking metric that measures the percentage of deposits a bank lends out.
A rising LDR signals that a bank is increasing its core activity of financial intermediation, turning customer deposits into loans.
While a high ratio can signify higher profitability, a ratio that is too high signals aggressive lending and a potential liquidity risk, as the bank holds less cash to cover unexpected withdrawals.
A ratio of 70 percent is globally considered a prudent benchmark for any banking sector, meaning the current ZiG LDR of 46 percent, though rising, suggests banks are still holding a significant liquidity buffer.
However, banking analysts contend that while appetite for ZiG loans remains high, commercial banks are constrained from lending due to persistent liquidity shortages.
The crunch prompted RBZ to launch the Targeted Finance Facility, a parallel initiative where funds are channelled through local banks to inject essential credit directly into the productive sectors, such as manufacturing and agriculture.
Initially, the ZiG was launched at an official exchange rate of 13,56 ZiG per US dollar. Since its debut, the RBZ has worked to promote its use across the economy alongside the US dollar in the multi-currency system.
official data shows the growing proportion of transactions being conducted in ZiG.
The ZiG is currently trading at 26,71 to the US dollar, maintaining a relatively stable trajectory since the central bank devalued the currency by 43 percent on September 27, 2024, to 24.4 ZiG per dollar to correct exchange rate disparities that distorted pricing models.
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