The Zimbabwe Banks and Allied Workers Union (ZIBAWU) has called for the immediate reversal of the government ban on bank lending, which they describe as suicidal in the financial services sector.
This follows the announcement on Saturday by President Emmerson Mnangagwa to the effect that all financial institutions must stop lending as part of measures to bring ‘sanity’ to the sector, a development that has been criticized by many as lacking any economic merit.
In a statement issued Tuesday, ZIBAWU said it was “gravely concerned” by the President’s pronouncements.
“Our main worry is the banning of lending by banks,” said the union.
“We have consulted widely and we are of the view that this is one of the policies that will result in serious unintended consequences. Firstly, one of the main functions of banks is lending. Taking away part of the main function of the banking sector is surely a way of destroying the whole sector. Some departments are going to close with concomitant job losses. Banks are going to be forced to increase bank charges, and restructure and some will face viability problems. The increased bank charges will increase inflation and hit hard on the poor.”
ZIBAWU said stopping bank lending would seriously affect the productive sectors of the economy resulting in company closures in the absence of loans and overdraft facilities.
“We expect policies that will aid economic recovery and we don’t believe that this is one such policy.
The union said its experience of the demand for loans indicated that some clients were applying for loans for medical care, school fees and other critical services.
“Banning loans is sentencing many to death,” said ZIBAWU.
“Some want to pay school fees and examination fees. The directive throws many children out of school and some will fail to write examinations. We regard these as negative consequences of the policy that may not have been intended and overlooked.”
ZIBAWU said the ban on bank lending would force many citizens to get funding from the informal channels with high-interest rates while also discouraging many from ever banking.
“It is our view that this policy should be reviewed and reversed immediately,” said ZIBAWU.
“It doesn’t benefit the nation as the negative outcomes far outweigh the anticipated positives. We, therefore, call for broad-based and inclusive monetary policy dialogue involving stakeholders, including unions in the sector as the long-term solution. This is the only way to come up with sound monetary policy interventions that do not create problems than those being solved. In the meantime, we call for the immediate reversal of this ban.”
RBZ governor John Mangudya told the state television on Tuesday that the ban is a temporary measure which is meant to contain inflation and stabilise its economy.
“We know this is a painful, but necessary, measure. It was necessary because of the increase in inflation. Some entities were now using funds from banks to purchase foreign currency.”