RBZ policies, not banks, driving high lending rates

The Reserve Bank of Zimbabwe's (RBZ) regulatory policies, rather than commercial banks' practices, are the main drivers of the country's persistently high lending rates, financial experts have warned.

Speaking during the fourth edition of the In Conversation with Trevor Ideas Festival, currently underway in Nyanga under the theme "The Future of Human Capital, Innovation and Ethics in the Age of AI," industry leaders pointed to restrictive central bank policies as the root cause of costly credit in Zimbabwe.

The festival, convened by Alpha Media Holdings (AMH) chairman Trevor Ncube, brings together thought leaders from various sectors to discuss the country's economic and developmental trajectory. AMH publishes NewsDay, Zimbabwe Independent and The Standard, and operates Heart & Soul TV.

The experts said that while the RBZ's tight monetary stance aims to curb inflation, it has also created an environment where banks are compelled to lend at unsustainably high rates.

Currently, the RBZ's benchmark policy rate stands at 35%, a level many market participants have criticised as excessively restrictive.

Responding to questions on how his institution sets lending rates, TN CyberTech Investments Holdings Limited chief executive officer, Tawanda Nyambirai, said the statutory reserve requirement was a key factor pushing rates upward.

"When you deposit money, there's a percentage that must sit at the Reserve Bank as non-interest-bearing funds," Nyambirai explained.
"At the moment, about 35% of deposits are taken and placed in a Reserve Bank account earning zero interest. So we only have access to 65% of that money."

He further noted that the RBZ's practice of converting surplus bank balances into non-negotiable, non-interest-bearing instruments held for 30 days also constrained liquidity and drove up costs.

"At times, you accumulate balances because you want to meet obligations, but the Reserve Bank can take those balances and give you paper that is useless for 30 days," he said.

"With that macro-economic environment, how can you reduce interest rates?"

Nyambirai acknowledged that regulators justified these policies as anti-inflation measures, but argued they had become a significant source of high borrowing costs.

"These measures, while meant to fight inflation, actually contribute to the high interest rates we have," he said, adding that reducing rates would require collaboration and sustained engagement with policymakers.

Echoing his sentiments, veteran banker and entrepreneur Nicholas Vingirai said the problem lay within the design of RBZ's regulatory framework.

"Regulating banks is not just about what they say — you can regulate the balance sheet of banks in ways that actually fuel the very problems being discussed," Vingirai said.

"As a regulator, you can help define banks' balance sheets in a way that benefits industry."

He argued that by revising how liquid and non-liquid assets are treated, the RBZ could help ease inflationary pressures and, in turn, allow interest rates to fall.

"It can actually help interest rates to go down," he added. "We have so much brain power here — we could solve the nation's problems right here in Nyanga."

Vingirai urged greater collaboration between regulators, banks, corporates and individuals.

"Until we, as stakeholders, identify our roles and face them with intent to resolve these issues, we will keep chasing our tails," he warned.

The debate underscores a growing consensus in the financial sector that addressing Zimbabwe's high lending rates requires not only monetary adjustments, but a systemic rethinking of the regulatory architecture that underpins the country's banking system.