US$600m trades outside banking sector
AT LEAST $600 million is circulating outside the formal banking system with revelations that more than $1 million exchange hands among informal traders in Mbare, Harare daily.
According to a latest Reserve Bank of Zimbabwe report on Currency in Circulation, an estimated $6 billion of a cocktail of foreign currencies including $140 million bond notes and coins, were in circulation as of the end of March.
However, the central bank noted with satisfaction that a considerable amount of money was circulating in legal activities including formal SMEs and informal markets.
The bank said it recognises the important role played by the SMEs in the implementation of the Financial Inclusion Strategy which will ensure that money circulating outside the banking system was tapped back.
The Financial Inclusion Strategy is envisaged to sustain growth in the economy and the use of mobile money by SMEs.
“The Reserve Bank estimates that around US$600 million is circulating outside the banking system,” reads part of the report.
“The Reserve Bank does not have specific estimates of actual money circulating at the Mbare Green Market, Siyaso and Mupedzanhamo.
“An amount of $1 million will be an acceptable working figure in line with expected volume of business in the (Mbare) area, although a specific survey will be required to confirm this.”
The bank said the country was experiencing a major economic shift from relying on large corporates to SMEs owing to high population growth.
Growth of SMEs, the bank said, was helping address some of the economic and social challenges emanating from high unemployment.
“Growth of the SME sector has also been boosted by the manufacturing base that has declined as a result of increased competition from cheaper imports,” cited the RBZ.
“A stronger SME sector can bolster a country’s resilience by broadening and diversifying the domestic economic base, thereby reducing vulnerability to sector specific shocks and fluctuations in international private capital flows.
“The integration of SME sector into formal business can also increase a country’s tax base and boost revenue.”
Although the central bank expresses concern over the sector which has remained unbanked, Small to Medium Enterprises Minister, Sithembiso Nyoni says high bank charges scare potential clients.
Said Minister Nyoni in an interview with The Sunday Mail: “The problem is not SMEs, but banks which are taking too much money from people.
“If you are in business and banking causes you to lose money, say US$1 from US$100 you would have banked, you would not be inclined to bank freely.”
Minister Nyoni said about 2,8 million people were in the SMEs sector.