This proposal highlight the background of the study ,the statement of the problem ,the research objectives ,significance of the study , delimitation and limitations of the study as well as to establish the challenges facing the credit system of Metropolitan Bank of Zimbabwe.
1.1 BACKGROUND OF THE STUDY
Metropolitan Bank of Zimbabwe is registered commercial bank, started operations on 1 February 1999.The bank has since grown to be an important player in the financial services sector in Zimbabwe. The core activities of the bank comprise Retail Banking, Corporate banking, Treasury and International Banking. Metropolitan Bank of Zimbabwe is headquartered in Harare, ...view middle of the document...
CBZ had the largest deposits with a total of US$ 250 million followed by Stanbic with US$150 million while Barclays and Stanchart had deposits of US$ 112 million and US$ 103 million respectively. The 4 institutions held 61% of the total deposits. Loans and advances registered amounted to US$ 501 million from US$ 263 million in June 2009, which resulted in a corresponding increase in sector loans to deposit ratio, which stood at 49, 3% as at October 31 from 37, 3% recorded in June this year according to The Financial Gazette, 12-18 November 2009.The countryâ€™s loan to deposit ratio is still considered markedly below the international ratios of between 70% and 90%. The two diagrams below shows the above information in relation to deposits per quarter year and deposits per bank.
|Month |Deposits (million) |Loans,advances (million) |Loans-Deposit ratio |
|June |US$706 |US$263 |37,3% |
|October |US$1,016 |US$501 |49,3% |
|O-Other 9 Banks |
Lending in Zimbabweâ€™s financial institutions is still limited to short term financing for working capital requirements with short pay back period. It is estimated that about 98% of bank deposits are presently transitory, a situation which makes it increasingly difficult for them to structure long term loans that are desperately needed by industry. A quarterly report from Kingdom Financial Holdings Limited (KFHL) indicated that long-term deposits only constitute US$16 million or 2% of the total deposits, estimated at more than US$1, 2 billion according to The Sunday Mail of January 24, 2010. The short term nature of deposits makes it difficult for the banks to carry out their intermediary role. The extended loan tenure for six months announced by some banks early January is still too short for businesses. Confederation of Zimbabwe Industries (CZI), the countryâ€™s biggest business grouping is advocating that the banks increase their loan tenure to more than the proposed six months, The Sunday Mail (January 17, 2010). The tenure is still not enough time to repay the loans especially in cases where funds were borrowed to finance projects. This has prompted the central bank in setting a threshold to guide banks in their lending to the productive sectors which required long-term working capital. Banks are compelled to orient their lending portfolios so as to achieve 30% of their deposits to the agricultural sector, 25% each to manufacturing and mining sectors and 20% to other remaining sectors.
The secondary market for marketable credit securities has long dried, and with the Reserve Bank of Zimbabwe...