The Central Bank Governor has voiced concern over the reluctance of Commercial Banks to utilize a special fund instituted by government to cushion their risks as they resume long-term lending.
Most commercial banks had scaled down on long term lending partly due to fears associated with the on-going global credit crunch.
As a mitigating factor, government through the Central Bank set up a special fund that would motivate banks to extend financing to businesses that deal in mortgages, lease of machinery, commercial trucks and general investments.
But according to Central Bank Governor, Francois Kanimba, this money is lying idle within government coffers because commercials banks have shied away from the facility.
Our banks need to understand that in any functioning economy, the financial sector forms the heart and lungs---sustaining any growth.
Therefore, a slight fall in credit extended to businesses or the general public is never good news for a growing economy like ours. This is exactly the fundamental lesson we pick from the on-going global recession.
Unfortunately, the reading from balance sheets of our commercial banks points to this direction. The majority have tremendously slashed down their loan portfolio and others have simply turned into non-starters when it comes to risk taking.
Much as the first half performance of our economy points to a firm footing, this growth can not be sustainable if our banks shy away from long-term lending.
For example, the construction industry that has been one of the key boomers stands to lose out if banks continue to close their doors.
Since this lack of ‘appetite’ to provide loans cuts across all sectors, the end result will be a slow recovery from the effects of the looming global crisis.
With this facility in place, our commercial Banks need to appreciate that government has played its part. The ball remains in their court to make good use of this gesture. Otherwise, their pace will not take us far.