Zimbabwe’s banks are likely to see negative growth this year according to a report in the respected financial publication Bloomberg. Banks in Zimbabwe have already retrenched about 8% of their precrisis staff and the trend is only likely to continue.

At least 300 of the 4,000 employees in the industry lost their jobs last year, according to the Zimbabwe Banks Allied Workers Union, more than five times higher than those dismissed in 2018. An economy that probably shrank 6.5% in 2019, an inflation rate of more than 440%, and a cash crisis that has seen foreign currency evaporate from the country is forcing banks to provide digital services.

Bloomberg on the Zimbabwean economic crisis

The tide has turned against banks

The initial stages of the current economic crisis was beneficial to banks as it began in the form of a cash crisis. Zimbabwean banks don’t make their money in traditional ways such as lending, relying instead on hefty bank charges for services such as transfers and making payments.

As people were not making cash they relied more and more on their bank cards and making transfers resulting in a boom for banks in 2016,2017 and 2018. However, as other problems such as a marked shift in inflation and unfavourable exchange rate began to take their toll the tide turned. So is the fact the banks relinquished their position as payment facilitators to Ecocash which hasn’t fared better either.

Econet and Cassava’s financial institutions that include Ecocash and Steward recorded losses resulting from exchange rate movements. Other banks and major companies are also likely to report the same.

The job losses will be another blow to the economy as they will probably spur further contraction of the economy.