Deposits in Zimbabwe’s banks: Protected or perilou...

Deposits in Zimbabwe’s banks: Protected or perilous?

Nyashadzashe Ndoro

ZIM NOW REPORTER

Zimbabwean lawmakers last week debated the Deposit Protection Corporation Act, a law designed to safeguard citizens’ savings in the event of bank failure.

While some parliamentarians expressed confidence in the Act, others raised concerns about its effectiveness in the country’s volatile economic climate.

Bikita South legislator, Energy Mutodi stated the importance of addressing idiosyncratic factors that contribute to bank collapse.

He pointed to mismanagement and risky lending practices by indigenous banks as leading causes of past failures.

“The general trend that has emerged ... are the primary source of bank instability,” Mutodi noted.

On the other hand, Tanatsiwa Mukomberi highlighted the role of the Deposit Protection Cooperation in reimbursing depositors.

He explained that the DPC Act establishes a fund, financed by levies from banks, to compensate individuals for lost savings. “The Depositors Protection Cooperation’s operations are guided by the Depositors Protection Cooperation Act which provides for the creation of the Depositors Protection Cooperation Fund,” Mukomberi stated.

A key point of contention was, however, the Act’s limitations. Lawmakers acknowledged a ceiling on the amount reimbursed, leaving depositors with significant losses if their savings exceed the limit.

“The loophole in this Act that needs refining ... is that of a ceiling of the amount that is compensated to the depositor,” revealed Mukomberi.

Concerns were further raised about the DPC’s ability to protect deposits in the newly introduced ZiG currency.

Nkayi South MP Jabulani Hadebe expressed skepticism, citing Zimbabwe’s history of economic instability and unpredictable policy changes.

“The Deposit Protection Corporation Act is a system designed to protect bank deposits in the event of bank failure, but is not designed to withstand the type of economic turmoil that is currently taking place in Zimbabwe,” argued Hadebe.

“Zimbabwe’s currency has been in a state of flux for many years and the introduction of yet another new currency will only add to the confusion and volatility. The Deposit Protection Corporation is a system designed to protect bank deposits in the event of bank failure, but is not designed to withstand the type of economic turmoil that is currently taking place in Zimbabwe.

“Moreover, the Government of Zimbabwe has a history of making sudden and unpredictable changes to the monetary policy. The Government of Zimbabwe has a history of not being transparent or accountable in its economic policies, which makes it difficult for the Deposit Protection Corporation Act to effectively do its job.

“In fact, there is no guarantee that the Government will even honour its commitment to protect deposits made in the new currency given its track record of breaking promises and not following on its economic commitments. Therefore, while the intention of the Deposit Protection Corporation is noble, it is unlikely to be effective in the current environment with vene vayo still in charge.”