MUTARE – Zimbabwe’s economic problems can be traced to banks which are being run like personal businesses outside proper corporate procedures, a top finance expert has said.
Speaking on the sidelines of the provincial launch of the Zimbabwe Deposit Corporation Scheme, Chief Executive Officer John Chikura of Deposit Protection Corporation said this unprofessionalism pushed government to protect depositors.
He said the current depositor’s protection regime will now cushion the depositors and set a tone for economic recovery.
“The major problem actually has been failures in risk management and failure in governance. In other words corporate governance because these banks were being run like tuckshops; they were run like personal outfits not like banks that are taking care of people’s money.
“The future is brighter as we expect that banks which have remained in the market to be stronger and will help grow the economy, “he said.
He said in terms of structural impediments including high interest rates, dissuading small businesses growth, micro finance institutions are there to serve instead of approaching banks which are deterrent.
He said through Reserve Bank stringent monitoring these micro institutions will serve small to medium businesses which need financial assistance.
“At the moment there are some institutions which provide money to small businesses. That’s why you notice that RBZ has been giving licenses to micro finance institutions whose sole purpose is to lend money whether for domestic consumption or to start business.
“The requirements and supervision is stringent for these micro finance institutions and people can get money from such institutions,” he said.
He said the role of the DPC was to ensure prompt reimbursement in case of a bank closure to cushion depositors from such unexpected closures.
“In general terms, deposit protection is a bank deposit guarantee scheme which ensures that depositors are reimbursed part or all of their deposits in the unlikely event of a bank failure,” he said.
In Zimbabwe, the Deposit Protection Scheme was established on 1 July 2003 in terms of section 66 of the Banking Act [Chapter 24:20] and the Banking (Deposit Protection) Regulations S. I. 29 of 2003 as read with section 4 of the Deposit Protection Corporation Act [Chapter 24:29].
Chikura said this scheme would ensure protection of depositors’ money as well as bringing confidence into the battered banking sector.
“Establishment of an explicit DPS in Zimbabwe in 2003 was a major milestone which ushered in explicit rules and regulations clarifying Government’s obligation to depositors in the event of a bank failure.
“So a DPS protects depositors, promotes financial inclusion, financial stability and ultimately, economic prosperity,” he said.