An Overview of Zimbabwe's Financial Sector

Topics: Bank, Financial services, Investment Pages: 10 (3064 words) Published: July 5, 2013

1.0 Introduction
The year 2004 will go down in history as a watershed year for the Zimbabwean financial sector. One would wonder why, but if one is conversant with the tragic events of that year, or was employed by one of the sunken banks, there would be no doubt in one’s mind that the year 2004 was arguably the most difficult year for Zimbabwe’s financial sector. As the Reserve Bank of Zimbabwe puts it, in its third quarter monetary policy statement of September 2004, some market analyst likened developments in the country’s financial sector to an “earthquake”. Many failed banks were occasionally suspended from the country’s clearing system due to failure to fund clearing balances within the stipulated time frames. Time Bank, for example, was suspended twice in October 2004 before being placed under the management of a curator. These institutions continuously experienced clearing deficits and had to raise the required funds as a result of negative market perception. Therefore, in this research project, the researcher would be evaluating on the impact of technology on asset allocation strategies in Zimbabwe financial institutions for the period 2004 – 2011 (a case study of Homelink Pvt Ltd) faced some challenges in its management of assets. 1.2 Statement of the Problem

The economic growth for the Zimbabwean economy has been on a downward trend for the period 2004 - 2011 and during this period asset allocation strategies declined. The researcher seeks to evaluate the impact of technology challenges on asset allocation strategies in the Zimbabwean financial economy.

1.3 Background of the study
Homelink was established as a money transfer system in 2004 by the Reserve Bank of Zimbabwe. As the money transfer system grew, the Reserve Bank of Zimbabwe transformed Homelink into a Pvt Ltd in February 2005 as a wholly owned subsidiary of the Reserve of Zimbabwe. It quickly became a brand name for the money transfer system in Zimbabwe. At the launch of Homelink in 2005, the Kumusha-Ekhaya concept gave expression to the Reserve Bank of Zimbabwe’s idea of linking Zimbabweans abroad with their home country by providing them with a safe, fast, convenient, reliable and legal money transfer system.

Mobilization of foreign currency from Zimbabweans living abroad was however not the only objective for setting up Homelink. This was supported by the following remarks that were made by Dr.G.Gono, Governor of the RBZ at the launch of Homelink (Pvt) Ltd in 2005. A visit was made to the Diaspora to meet Zimbabweans living there so as to tell them about the new money transfer system that had been put in place as well as to invite their participation in country’s economic turnaround and to get their suggestions to make the system a success. Although Homelink as a corporate body is not a money transfer agency, the Homelink brand today represents the official money transfer system in Zimbabwe. The Homelink brand is well established both in Zimbabwe and abroad but with all that in its respect it still does face technological challenges in meeting its strategies.

1.4 Purpose of the Research
Lending business in Zimbabwe has become very challenging as a result of the hyper-inflationary conditions that have prevailed in the economy since the Foreign Exchange Crisis of 1997. The negative growth in real Gross Domestic Product (GDP) experienced hitherto has dampened loan demand to the extent that Homelink had to seek other investment opportunities to earn a fair return on shareholders’ funds. The lack of trading on the foreign exchange market has not done financially institutions any good either.

Given the low levels of loan demand and the deterioration in loan book quality reported by many financial institutions, and the associated substantial bad and doubtful debts provisions, it appears there is limited scope for institutions to earn high returns without undertaking market and technological risks. The increased emphasis on prudential...

References: 1) Andrew. W and Underwood D et al (2000) Information Technology Risk Management
For Financial Institutions, USA.
2) Banks and banking survey (2007).
3) Bouton and Sumlinki (2000) Microfinance Sector Recovery Study, Boston, USA.
4) Fageber (1996) Technology and Competitiveness, Oxford Review Economic Policy
5) ICBA Independent Banker April 2011 by Doug Underwood
6) Underwood. D (2011) New Technologies and Your Audit
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