• Strong Credit Growth: Credit to the private sector increased by 20% from December 2024 to May 2025, indicating growing confidence in the banking sector
• Low Non-Performing Loans (NPLs): The NPL ratio stands at 3.3%, significantly below the international benchmark of 5%
• Positive Economic Indicators: The banking sector demonstrates stability through robust capitalisation and strong liquidity positions

Harare- Zimbabwe’s banking sector has demonstrated notable strength in the first half of 2025, as highlighted by Finance, Economic Development, and Investment Promotion Minister, Professor Mthuli Ncube, in the mid-term budget review.

The sector's stability is underpinned by robust capitalisation, satisfactory asset quality, and strong liquidity positions.

During the 5 months to May, Credit to the private sector saw a significant 20% increase from December 2024 to May 2025, primarily directed toward private sector entities, signaling growing confidence in the sector’s ability to support economic activity.

Additionally, non-performing loans (NPLs) were reported at 3.3% in March 2025, well below the international benchmark of 5%, indicating improved asset quality and effective credit risk management.

Monetary developments also aligned with the economy’s growth trajectory and inflation targets, with both reserve and broad money supply growing steadily during this period.

These indicators collectively point to a banking sector that is strengthening its fundamentals, fostering confidence among stakeholders, and contributing to Zimbabwe’s projected 6% GDP growth in 2025.

Analysis

The stability and growth observed in Zimbabwe’s banking sector in 2025 reflect a positive shift in its economic role, particularly in supporting private sector growth and maintaining financial discipline.

The 20% credit expansion to the private sector suggests banks are increasingly willing to lend, likely driven by improved economic conditions and the introduction of the Zimbabwe Gold (ZiG) currency, which has helped stabilise the monetary environment.

The low NPL ratio of 3.3% indicates that banks have enhanced their credit underwriting processes, reducing the risk of loan defaults despite Zimbabwe’s volatile economic history.

However, challenges such as currency fluctuations, high inflation, and liquidity constraints persist, as noted in broader analyses of the sector. These factors could limit the sector’s ability to sustain growth unless addressed through targeted reforms.

The alignment of money supply growth with inflation targets further suggests that the Reserve Bank of Zimbabwe (RBZ) is maintaining a cautious monetary policy, which is critical for sustaining confidence but may constrain liquidity if overly restrictive.

History of Banking in Zimbabwe

Zimbabwe’s banking sector has undergone significant transformations over the past four decades, shaped by economic and political upheavals. In the 1980s and 1990s, the sector operated in a relatively stable environment, but the early 2000s brought severe challenges due to hyperinflation and economic mismanagement.

The adoption of the multicurrency system in 2009, following the collapse of the Zimbabwean dollar, led to significant depositor losses, severely eroding public confidence in the banking system.

This period saw a shift toward informal cash transactions, exacerbating liquidity shortages.

The reintroduction of the Zimbabwean dollar in 2019 and subsequent currency volatility further strained the sector, with high lending rates and poor savings culture identified as persistent challenges.

Despite these setbacks, recent developments, such as the introduction of the ZiG currency in 2024 and improved regulatory frameworks, have contributed to the sector’s recovery, as evidenced by the 2025 performance metrics.

Public confidence in Zimbabwe’s banking sector has been undermined by several policy-related issues over the years. The 2009 multicurrency system, while stabilising the economy, resulted in significant depositor losses, as savings in Zimbabwean dollars became worthless, fostering widespread distrust.

The RBZ’s quasi-fiscal operations and lack of a lender of last resort during the hyperinflation era exposed banks to systemic risks, further eroding confidence.

High account operating costs and punitive banking fees have also deterred customers, particularly in the informal sector, from engaging with formal banking channels.

 The absence of robust deposit protection mechanisms and low financial literacy in some segments have compounded these issues, as customers lack assurance that their funds are secure.

Additionally, currency volatility and restrictive monetary policies, such as high reserve ratio requirements, have constrained liquidity, making banks less attractive to depositors. These factors have collectively driven many Zimbabweans to prefer cash-based or informal financial systems, limiting the sector’s growth potential

Improvements Needed for the Banking Sector

To enhance the banking sector’s development and restore public confidence, Zimbabwe must implement several critical reforms like strengthening deposit protection through increased awareness of the Deposit Protection Corporation and formalising guarantees for depositors can rebuild trust.

Also, reducing account operating charges and adopting “pay-as-you-go” banking models could attract the informal sector, addressing liquidity shortages and boosting financial inclusion.

Fostering digital innovation is essential, as demonstrated by the success of mobile financial services like EcoCash. Banks should partner with reliable mobile network providers and invest in AI, cloud-based solutions, and fintech collaborations to enhance efficiency and customer experience.

Of paramount importance is addressing liquidity and undercapitalization issues is crucial, potentially through policies that encourage foreign direct investment (FDI) and improve capital adequacy.

Robust governance and regulatory frameworks are needed to ensure transparency and reduce corporate scandals or cyber risks, which further undermine confidence.

By aligning these reforms with macroeconomic stabilization efforts, such as formalizing the US dollar or stabilizing the ZiG currency, Zimbabwe can create a more resilient and inclusive banking.

Therefore, Zimbabwe’s banking sector in 2025 is on a promising trajectory, driven by improved fundamentals, credit growth, and digital innovation. However, its historical challenges, including depositor losses and policy missteps, continue to cast a shadow over public confidence.

To sustain growth, Zimbabwe must address liquidity constraints, enhance deposit protection, and foster innovation while ensuring robust governance. These steps, combined with macroeconomic stability, will position the banking sector as a cornerstone of Zimbabwe’s economic recovery and growth.

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