Shifting economic trends presents challenges: Chinamasa
THE structural shifts that has taken place in the economy requires all sectors, including the banking industry to adopt strategies to catch up with the new trends, a senior government official said Monday.
Finance and Economic Development Minister, Patrick Chinamasa said the banking sector must come up with strategies to make the informal sector open account as most funds held by informal business were not coming into the financial system, leading to the current situation where banks were starved of liquidity to lend to industries.
About 70 percent of the economy is now estimated to be in the informal sector.
Chinamasa told a financial inclusion workshop in Harare that even government was finding it difficult to raise revenue through taxes because taxing the informal sector had proved to be difficult.
Some estimates have indicated that more than US$7 billion was circulating in the informal sector, although this number has been disputed by other officials, including the Reserve Bank of Zimbabwe.
“There has been a structural shift to the informal sector. The larger economy is now presiding in the informal sector. I cannot ignore the informal sector. More money is now flowing in the informal sector than in the formal sector. But it is difficult to tax the informal sector,” he said.
Turning to the banking sector, the minister said there was significant demand for banking services in the informal sector.
However, the banking industry had failed to come with products that suit the needs of the sector, which will encourage them to open bank accounts.
If the banking sector, with a US$4 billion deposit base at the moment, opens up to the informal sector, the level of deposits are expected to rise, and this funding can then be channeled industries through lending.
“There is huge demand for services, huge demand for borrowing, but the banking sector has not yet put its act together. They have no idea how to handle the informal sector, it has never happened (that an economy is dominated by informal traders). They don’t know how to deal with them,” Chinamasa noted.
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