Wholesalers have become the new ‘lender of the last resort’ selling cash to locally owned banks. According to a source at ZB Financial Holdings the bank is borrowing cash from Harare wholesaler Mohammed Mussa a charge which the bank has denied.
Banks are said to be in overnight loan arrangements with the wholesalers which attract interest rates of 10 to 12 percent depending on the amounts borrowed.
Banks have been struggling to meet their obligations to their depositors and the situation has been worse in locally owned banks as they do not have many options of importing cash from outside the country forcing them to make alternative arrangements to service their clients. This has opened an opportunity for business people who are holding large amounts of cash.
“The most important cash barons right now in Harare are the two biggest wholesalers who are selling cash to banks since the Reserve Bank of Zimbabwe can no longer play its role as the lender of last resort. This has opened opportunities for the business people who are generally known for their “mattress” banking strategies” said a source in one of the locally owned banks who refused to be named.
ZB denied engaging in the practice of borrowing money from individuals. The bank said that Mahomed Mussa was their client and as such they were bound by client confidentiality clauses which made it inappropriate to comment on the nature of their dealings.
Head Group Corporate Services at ZB Financial Holdings Mr SK Chiganze said. “Mahommed Mussa is a ZB Bank client and as such we are bound by our bank- customer confidentiality clauses. We regrettably are unable to comment on the information you say you have pertaining to lending purportedly being done in the market.”
He added “As ZB we continue to act guided by RBZ and aim at giving our customers the maximum assistance and ensure Individuals and corporate clients continue to go about their business even during the prevailing market wide cash challenges through offering cashless solutions.”
Efforts to get comment from one of the named big wholesalers, Mahommed Mussa were unsuccessful. Bankers Association President Charity Jinya was unavailable to comment.
A client at the Bank who refused to be named said that the bank should not be blamed for making arrangements in order to meet the cash demands of its clients if such a thing was happening.
He said “what do you want the banks to do? All we want is our money and we do not care how or where they get it”
The Reserve Bank has ordered all wholesalers to put point of sale machines in their shops but some business operators continue to ignore this directive. A visit to some of the shops showed that some shop owners have not yet complied with this directive.
Government has stepped up its efforts to have people use plastic money in order to ease the demand for cash in the market. This seems to be falling on deaf ears as panic withdrawals have continued.
Many citizens and business operators are skeptical about using the banking system as they are unsure of what will happen to their savings as many of them fear the return of the Zimbabwe dollar. In 2009 many people lost their savings then as the government switched from the Zimbabwe dollar to the US dollar without notice.
The government of Zimbabwe was last year ordered to pay back money the Reserve Bank had raided in private accounts when the country was facing serious foreign currency shortages. Many banks have also closed down over the years with depositors losing all their savings. More than ten banks mostly locally owned have closed down due to abuse of depositors funds.
As a result many people prefer not to bank their cash. Government has not done enough to allay the fears of citizens either as it has persistently shifted pay dates for civil servants leading observers to speculate that government is broke.