Bankers Association of Zimbabwe (BAZ) president, Mr. Lawrence Nyazema, suggested in an interview that pension funds, as custodians of long-term retirement savings, could significantly boost the mortgage finance sector by depositing these savings with banks.
A mortgage is a type of loan that enables individuals to purchase or maintain real estate, such as homes or land. The borrower agrees to repay the loan over time, typically through regular payments covering both the principal and interest, with the property itself serving as collateral.
In Zimbabwe, the mortgage market is mainly dominated by short-term loans ranging from three to five years. Mr. Nyazema pointed out that if pension funds were to deposit their long-term savings with banks for durations such as 25 years, banks could then invest those funds in projects that would mature by the end of that period.
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However, Zimbabwe’s pension industry has been negatively impacted by hyperinflation, especially during the periods leading up to the dollarisation in 2009 and recent inflationary pressures, eroding public confidence in the sector, according to Mr. Nyazema.
“As a result, the average person feels they are better off managing their own investments rather than committing to long-term investments with banks due to the loss of value they have experienced in the past,” said Mr. Nyazema.
He further explained, “Currently, we rely on short-term deposits to fund these short-term mortgages, typically three to five years.”
Most mortgage options in Zimbabwe currently do not favour retail clients, as they require a deposit of 20 to 50 percent of the property value and full repayment within six to 24 months.
Mr. Nyazema emphasized that the key to unlocking the potential of pension funds lies in achieving a stable macroeconomic environment with low inflation, which would encourage savings growth and promote investments in long-term assets such as mortgages.
“We are moving in the right direction by stabilising the economy and restoring public confidence in savings products. However, because people have been hurt in the past, it will take some time to regain previous levels of trust, similar to where other countries are,” he noted.
Mr. Nyazema also highlighted that the banking sector has managed to survive through a mix of daily deposits and staggered salary payments.
“There is a continuous cycle of depositing and withdrawing, which has sustained us. Otherwise, if all salaries were paid on the same day, we would deplete our deposits. This has limited our capacity as financial intermediaries. Currently, the loan-to-deposit ratio in the industry stands between 50 and 60 percent. In other countries, banks lend up to 90 percent, as they are confident that deposits will remain stable within their institutions,” he added.
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