FBC Holdings loan book reflects Zim’s consumption dilemma
AS the global economy continues to grapple with the impact of inflation and depreciating currencies, Zimbabwe finds itself in the throes of a consumption crisis, as evidenced by the swelling loan book of FBC Holdings (FBC).
The financial institution’s loan portfolio surged to $1.6 trillion in the full year 2023, up from $764 billion, revealing a stark picture of the country’s economic landscape.
At a time when purchasing power has been eroded by soaring inflation and a weakening currency, individuals and businesses alike have turned to borrowing to sustain their consumption needs.
Economist Tinevimbo Shava noted; “The FBC loan book reflects how consumptive we have become as a country due to low purchasing power resulting from inflation and a depreciating currency.”
The sectoral breakdown of FBC’s loan book tells a tale of reliance on consumption-driven activities.
Manufacturing loans, totalling $204 billion in 2023, accounted for 12 percent of the total loans, while wholesale and individual loans stood at $194 billion and $189 billion respectively, each representing 12 percent shares of the total loan portfolio.
The surge in consumption loans during 2023 can be attributed to various factors as manufacturers sought financing to source raw materials amid supply chain disruptions and rising input costs.
Wholesalers turned to credit to import finished goods as local production struggled to meet demand, meanwhile, individuals, grappling with the economic strain, borrowed to navigate the challenging environment.
“This shift in loan allocation underscores the challenges faced by various sectors in maintaining production and meeting consumer demand in the face of economic headwinds,” observed Shava.
Notably, the once-prominent mining sector witnessed a significant decline in loan uptake, dropping from 14 percent of total loans in 2022 to just 4 percent in 2023. This decline reflects the sector’s struggle to maintain operations amidst a myriad of challenges, including electricity shortages and struggling commodity prices.
Shava emphasised the need for Zimbabwe to address the root causes of its economic woes to foster sustainable growth.
“While borrowing may provide temporary relief, it is imperative for policymakers to implement measures that address structural issues such as inflation, currency stability and productivity to create an environment conducive to investment and economic expansion,” he said.
The shift in the loan book of FBC Holdings serves as a poignant reminder of the delicate balance between consumption and economic stability. While borrowing may offer shortterm solutions, it also highlights the underlying vulnerabilities within the economy that must be addressed to ensure long-term prosperity.
As the country navigates its economic challenges, stakeholders across sectors must collaborate to implement strategies that promote sustainable growth and mitigate the adverse effects of inflation and currency depreciation.
Only through concerted efforts can the nation steer towards a path of economic resilience and prosperity.
The surge in FBC Holdings’ loan book reflects Zimbabwe’s consumption dilemma amid economic challenges characterised by inflation and a depreciating currency. The shift towards consumption-driven borrowing underscores the need for comprehensive economic reforms to address structural issues and foster sustainable growth.