CAUSES OF FINANCIAL DISTRESS IN ZIMBABWE


      There are many causes of financial crisis that a country may suffer from dilution and insolvency, during hard times of Zimbabwe’s financial incapacity and uncertainty, business experts would definitely agree to try to look at the past and found out that there are banks who contributed to this problem that the country has been facing. During the year 2000 the banking crisis has changed the course of the industry, they have learned to become independence because of the hardship that they found.           


      According to Patterson Timba founder of Renaissance Merchant Bank of Zimbabwe, during 2001 they have learned to survive the environment and they can survive anything. But a clear sign of corruption has manifested the RMBZ when they have robbed their client’s deposits bringing any other bank at risk and distrust. This news has become one of the biggest banking plunder in the history of Zimbabwe, When Mr. Timba and his family has gotten money from the bank without the board approval.


      The money they have gotten equal to almost 25% of the banks capitalization which is about USD ,000,000 or more. Report shows that Mr. Timba and their family have gained the amount through siphoning and interbank transfer to their account. The closure of this bank and the so called corruption incidence has caused other banks to struggle and misjudge by customers who withdraw their investment due to bank scare.  


      The Zimbabwe Allied Banking Group an amalgamation of bank during the year 2003 has fall down with so much fund shortage. This has been one of the biggest banks in the country but because of financial constraint and mismanagement of depositor’s funds,  the company has been engage in non banking businesses and they have spend so much on assets that should not be included in the industry. They have also been engage in the personal loans of bank management and other employees. Management has also spent non recorded funds that were use for promotion and advertisement when left alone has no fund to offer to their depositors.


      Zimbabwe Allied Banking Group includes Royal Bank Zimbabwe Limited, Trust Bank Corporation Limited and Barbican Bank Limited. These banks are force to curatorship solicited by the Central Bank because of corruption. They were accused of using funds, later the Reserved Bank decided to all three banks so it was returned to its original owner but still the bank was reported to overspending capital. In 2005 the Zimbabwe Allied Banking Group reported to spend at least 132 luxury cars for management use each having at least USD 50 dollars monthly. CEO Stephen Gwasira gets a salary of USD 124 dollars daily. This has been the reason why most employees has rebel against the management and had a dispute against their salaries and wages while most of their customers decided to withdraw their investment.   


      In today’s banking industry the government has fully obliged these banks to serve the country and to develop inherent impact and stability. They have taught new strategy and risk management in which the banks of Zimbabwe are now in line with International Standard using Global Credit Rating and Rational Funding Systems are encouraged. The expansion can only be allowed by the government only if the bank has an adequate capital for restructuring so that bank may not be able to take advantage of expansion through false ideas and promotion. This can protect the investment of their clients before the bank would shut-down and declare bankruptcy, this will also control and monitor banks if they perform well and pay taxes for the government.


      There will be no overstating of capital that can trick their position to lend money which they cannot offer; they will be given a restriction and financial position to show. Bank will have to present their accounting system for today to the governing bodies only to solidify their performance before expansion.   


      But in the present times the memory of the past happens again in Reserve Bank The truth is that the bank lost at least USD 400,000 scam due to their employees scam activities, who’s name were Sydney, Stanley, Muschelyn and Greyzon another member divided the amount but they were caught by the investigator and recover about USD 250,000 but Greyzon is still at large. Tsitsi the senior bank manager have reported the case in time that’s why they were caught easily. 


      Even they have said that the real causes of financial crisis are liquidity and insolvency that result in mismanagement of banking system, negligence, poor corporate governance, non distribution of loans, and non sustenance of capital accessibility. They reassure their clients that the banking industry of 2001 will never be the same again for it will remain safe and sound, but all this promises remains to be seen.


     


 



Credit:ivythesis.typepad.com


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