FINANCIAL STABILITY REPORT

Contents
7. ANTI-MONEY LAUNDERING, COMBATING OF THE FINANCING OF
TERRORISM
AND
COUNTERING
PROLIFERATION
FINANCING

Table of Figures
Figure 11: Distribution of Applications to the Regulatory Sandbox as of 31
Figure 12: Volume of Shares Traded in Millions(Zimbabwe Stock Exchange 2019-

List of Tables

Purpose of the Report
The Report provides an overall assessment of financial stability in 2023, considering
potential risks to financial stability and mitigants thereof. The report also serves to
promote the mitigation of systemic risks by stimulating market participants' evaluation of
the wide range of risk factors in the financial sector in the context of developments in
domestic, regional, and global environments.

This report is produced in fulfilment of the mandate of the Multidisciplinary Financial
Stability Committee to prepare financial stability reports. The Multidisciplinary Financial
Stability Committee is constituted by the Reserve Bank of Zimbabwe, Insurance &
Pensions Commission of Zimbabwe, Securities & Exchange Commission of Zimbabwe,
and the Deposit Protection Corporation. The report is published annually and
incorporates significant developments that have an impact on financial stability at the
time of finalisation of the report.

GOVERNOR’S FOREWORD

Global financial risks remained elevated in 2023 notwithstanding disinflation gains and
slow recovery of the global economy. The sudden escalation of interest rates on the back
of disinflation measures inadvertently generated downside risks, including losses in interest
earning securities portfolios a development that contributed to the failure of some banking
institutions in the United States, as well as in Switzerland.
Adverse shocks including increases in inflation, stability concerns in China, renewed
concerns on debt sustainability, as well as high interest rates continue to pose risks to
global financial stability (Global Financial Stability Report, 2023). Persistent global
geopolitical tensions that continue to suppress global growth expectations, are also
envisaged to influence the economic outlook for 2024. These developments underscore
the critical need for ongoing strategic regulatory, and supervisory interventions in
maintaining financial stability.
On the domestic front, exchange rate volatility and inflationary pressures during the
greater part of the year, as well as increased cyber related risks on the back of increased
digitalization in the financial system and the anticipated impact of the El Nino induced
drought elevated financial stability risks. Notwithstanding, the financial system continued
to depict resilience. The banking sector was adequately capitalised, coupled with
satisfactory asset quality, sustainable earnings, and liquidity buffers. The payment systems
demonstrated considerable robustness to handle high-value transactions consistently and
reliably, with financial markets continuing to operate smoothly and efficiently to meet the
legitimate needs of the economy. Maintenance of tight monetary policy and appropriate
supervisory interventions contributed to ensuing macroeconomic and financial stability.
Banking sector performance was also a reflection of resilience capability management on
the part of banking institutions, characterized by sound risk management systems,
including continuous enhancement of cyber risk management practices amid increasing
threats of cyber-attacks.

Risks to the capital market emanated mostly from the concentration of funds under
management among 18.5% of asset management companies and the inability of certain
Securities Market Intermediaries (SMIs) to meet capital requirements. Notwithstanding,
the capital market demonstrated resilience, protecting the larger financial system from
possible volatility and maintaining investor and participant confidence.
The insurance and pensions sector maintained a general state of soundness, crucially
contributing to overall financial stability despite facing inflationary pressures, which eroded
the value for policyholders and members.

The Deposit Protection Corporation continued to provide coverage of banking sector
deposits at a sufficient level to maintain confidence in the sector, an imperative for
maintaining financial stability.
Robust anti-money laundering, combating financing of terrorism and proliferation of
weapons of mass destruction (AML/CFT/CPF) frameworks are critical in fostering economic
and financial stability in the country by instilling confidence, increasing investment,
promoting economic growth, and protecting financial resources from illicit proceeds
generated by criminals. In this regard, financial sector regulators conduced on and off-site
supervisory activities to promote the implementation of strong AML/CFT/CPF risk
management systems in the Zimbabwean financial sector in line with international best
practice.
Domestic financial sector regulators under the auspices of the Multidisciplinary Financial
Stability Committee continue to develop and proactively improve supervisory techniques,
methodologies, and standards as part of financial stability enhancements. Considerable
progress was made in the operationalisation of the Contingency Planning and Systemic
Crisis Management Framework, as well as the development of a Macroprudential Policy
Framework. Technical assistance received from the International Monetary Fund and
training from the Macroeconomic and Financial Management Institute of Eastern and
Southern Africa (MEFMI) will assist in the finalization of these frameworks. These
frameworks will go a long way in enhancing crisis preparedness as well as reinforcing

financial stability assessments which are critical in identification and proactive
management of identified emerging vulnerabilities.
Other financial stability enhancement initiatives in 2023, included the issuance of Model
Risk Management Prudential Standard and Climate Risk Management Guideline by the
Reserve Bank. The Securities and Exchange Commission of Zimbabwe developed
comprehensive Guidelines for Valuation of Listed Entities and a Framework for Property
Valuation. The Insurance and Pensions Commission facilitated the issuance of Statutory
Instrument 81 of 2023, Insurance (Amendment) Regulations, 2023 (No. 26) to address
the unsustainable high premium debtors within short-term insurers, which threatened their
liquidity and soundness.
The Bank will continue to institute appropriate monetary policy measures that ensure
conducive conditions for macroeconomic and financial stability.
I would like to take this opportunity to appreciate the collaborative efforts of the Ministry
of Finance, Economic Development and Investment Promotion, financial sector regulators,
and key stakeholders in upholding the stability of Zimbabwe's financial sector and enabling
it to effectively contribute to sustainable economic growth and development.


Dr. J. P. Mangudya
Governor
Reserve Bank of Zimbabwe

1.
MACROECONOMIC DEVELOPMENTS

Global Economic Environment
1.1.
Global economic growth slowed down from 3.5% in 2022 to 3.2% in 2023 (World
Economic Outlook, April 2024) on the back of stringent monetary policies in advanced
economies. The policies, characterized by high-interest rates aimed at mitigating
inflationary pressures had far reaching implications with some banking institutions
recording losses in securities portfolios, resulting in weaker balance sheets and liquidity
positions. The downside risks culminated in the failure of three American banks, Silicon
Valley Bank, Signature Bank and First Republic. In Switzerland, authorities led a state-
supported merger of Credit Suisse with UBS following a loss of market confidence. This
marked the first failure of a global systemically important bank since the 2008 global
financial crisis.
1.2.
Geopolitical tensions, notably the Russia-Ukraine conflict, not only had a negative
influence on economic growth, but impacted the state of global financial stability
through financial fragmentation, and reversals in cross-border capital flows, especially
for emerging markets and developing economies. According to the Global Financial
Stability Report (April, 2023), the effect of global tensions on emerging market
economies will result in a decline in net capital flows of about 3% of GDP compared to
2% of GDP for advanced economies. In addition, an increase in geopolitical tensions
could also disrupt cross-border payment activity.
1.3.
Table 1 shows the global and regional economic growth developments and outlook.

Table 1: Global and Regional Economic Growth Developments and Outlook (%)

Region/Country
2022 Act.
2023 Est.
2024 Proj.
World Output
3.5
3.2
3.2
Advanced Economies
2.6
1.6
1.5
USA
1.9
2.5
2.1
Euro-Area
3.4
0.5
0.9
United Kingdom
4.3
0.5
0.6
Emerging Markets & Developing Economies
4.1
4.1
4.1
Emerging and Developing Asia
4.5
5.4
5.2
China
3.0
5.2
4.6
India
7.2
6.7
6.5

Region/Country
2022 Act.
2023 Est.
2024 Proj.
Emerging and Developing Europe
1.2
2.7
2.8
Russia
-1.2
3.0
2.6
Sub Saharan Africa
4.0
3.3
3.8
Nigeria
3.3
2.8
3.0
South Africa
1.9
0.6
1.0
Source: IMF World Economic Outlook (WEO) April 2024

Domestic Developments

Economic Growth

1.4.
The 5.5% growth in the domestic economy in 2023 was a positive financial stability
development as it created conducive conditions for improved health of corporates and
households. The growth was mainly underpinned by agriculture (11.1%), and mining
(4.8%) sectors. The agriculture sector's growth was driven by a record tobacco
production of 295 million kilograms. Additionally, sustained investments in the mining
sector, notably in the lithium sub-sector, further bolstered the economy's overall
growth.


Exchange Rate Developments

1.5.
The exchange rate stability experienced in the first quarter of 2023, contributed
positively to financial stability. The interventions in the foreign exchange market
through the auction system played a critical role in mopping up excess liquidity and
maintaining the multicurrency environment. This sustained the exchange rate, price
and financial stability. However, a significant shift was observed in the second quarter
when the economy faced a steep depreciation of the exchange rate. To limit the adverse
impact of exchange rate volatility, the Bank launched the wholesale foreign exchange
auction in June 2023, in addition to tightened monetary policy alongside more stringent
government procurement protocols. These policy interventions played a crucial role in
mitigating further depreciation of the exchange rate.
1.6.
The figure below shows the trend in the exchange rate in 2023.

Figure 1: Exchange Rate Trend (USD/ZWL) in 2023


Source: RBZ (2023)

1.7.
The current account surplus declined from US$305.0 million in 2022 to US$133.9 million
in 2023, indicating pressure on the exchange rate, the volatility of which has financial
stability implications.
1.8.
Table 2 below shows foreign exchange transactions in 2022 and 2023.

ZWL
31-Jan-23
28-Feb-23
31-Mar-23
30-Apr-23
31-May-23
30-Jun-23
31-Jul-23
31-Aug-23
30-Sep-23
31-Oct-23
30-Nov-23
31-Dec-23

Table 2: Current Account (USD Millions)

A. Current Account
305.0
133.9
Goods and Services
-2115.1
-2690.3
Exports
7453.5
7602.7
Imports
9568.6
10293.0
Balance on Goods
-1131.6
-1452.9
Exports
7000.2
7203.5
Imports
8131.8
8656.4
Balance on Services
-983.5
-1237.4
Exports
453.3
399.2
Imports
1436.8
1636.6
Balance on Primary Income
-623.9
-435.3
Credits
6.8
7.0
o/w Compensation of Employees
3.9
4.06
Dividends
2.9
2.94
Debits
630.7
442.3
o/w Compensation of Employees
8.7
18.8
Dividends
372.5
169.0
Interest
249.4
254.4
Balance on Secondary Income
3043.9
3259.5
Credits
3081.1
3297.2
Personal Transfers
1970.6
2162.4
Transfers to NPISHs
1110.5
1134.8
Debits
37.2
37.7
Source: RBZ (2023)


Inflation Developments

1.9.
The decline in annual headline inflation, from 55.93% in December 2022 to 18.36% by
September 2023, signified the effectiveness of the stringent monetary policy measures
implemented by the Bank in promoting economic and financial stability. The latter part
of 2023, however, witnessed a reversal of this trend, with inflationary pressures
resurfacing due to the depreciation of the local currency, leading to an uptick in headline
inflation to 26.52% by December 2023.

Figure 2: Annual Inflation (January 2022 to December 2023)


Source: ZIMSTAT (2023)

Broad Money
1.10.
Broad money (M3) grew by 708.93% in 2023, from ZW$2,338.23 billion in 2022 to
ZW$18,914.59 billion. While the growth in money supply can provide necessary liquidity
and support economic growth, it also creates downside risks such as inflation, asset
bubbles, and currency depreciation. The growth in M3 was attributed to a rise of
884.97% in foreign currency deposits and 421.85% in local currency deposits. The
surge in foreign currency deposits was underpinned by valuation adjustments driven by
the local currency's depreciation, from ZW$684.33 per US$1 at the close of 2022 to
ZW$6,104.71 per US$1 at the end of 2023.
1.11.
In tandem with exchange rate movements, the proportion of foreign currency deposits
within M3 increased from 61.99% at the end of 2022 to 75.48% by December 2023.
Figure 3 shows monetary developments for the period December 2022 to December

All Items
Food
Non-Food

Figure 3: Monetary Developments


Source: RBZ (2023)


1.12. Domestic credit registered a year-on-year growth of 790.66%, from ZW$1,887.87
billion in December 2022 to ZW$16,814.57 billion in December 2023. The growth largely
reflected annual increases of 914.07% and 908.65% in credit to private sector and net
claims on Government, respectively. The rapid increase in credit growth potentially
increases risks to financial stability in the form of asset bubbles, and overleveraging,
particularly in a high interest rate environment which may elevate the risk of credit
defaults.
Interest Rates Developments

1.13.
During 2023, the Reserve Bank maintained a relatively tight monetary policy as it
continued to contain exchange rate depreciation and inflationary pressures in the
economy. The high interest rate environment, however, did not have a significant
impact on financial stability risks as it did not lead to an increase in nonperforming
loans. The policy rate was adjusted downwards from 200% to close the year at 130%
to support economic growth. In the outlook period, interest rates are expected to
gradually decline in line with projected inflation trends, with positive spinoffs on
financial stability.


Foreign Currency Deposits
Local Currency Deposits
Currency in Circulation
Annual Growth
ZW$ Billion
Dec-22
Jan-23
Feb-23
Mar-23
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
%

1.14.
Time deposit rates for 90-days and 360-days averaged 56.03% and 66.07%,
respectively. The savings rates were quoted between 30% and 50%, during the period
under review. Major interest rate highlights during the review period are shown in
Figure 4 below.
Figure 4 : Interest Rates on Local Currency Financial Assets (%)


Source: RBZ (2023)

1.15.
Lending rates for foreign currency-denominated loans ranged between 7% and 18%.

90 Deposit Rates
Max Weighted Lending Individuals
Max Weighted Lending - Corporate
Policy Rate
Jan-22
Feb-22
Mar-22
Apr-22
May-22
Jun-22
Jul-22
Aug-22
Sep-22
Oct-22
Nov-22
Dec-22
Jan-23
Feb-23
Mar-23
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23

43.15


24.76

2.
BANKING SECTOR ANALYSIS

2.1.
The banking sector maintained its strong loss absorbing capacity in 2023 with average
banking sector capital adequacy ratio closing the year at 37.35%, compared to 37.51%
in December 2022. The Domestic Systemically Important Banks’ (DSIBs) average
capital adequacy ratio remained strong at 28.4% in 2023 from 28.64% in 2022
reflecting resilience of the largest banks against unforeseen shocks. The trend in
average capitalisation for the banking sector is presented in the figure below.
Figure 5: Banking Sector Capital Adequacy Ratio Trend (%)


Source: RBZ (2023)

2.2.
High capital buffers, which were mainly spurred by organic capital growth, protect the
banking system from unforeseen shocks.
2.3.
The sector’s resilience was mainly attributable to proactive reconfiguration of business
models, processes and systems, as well as enhancement of risk management systems
by banking institutions in line with the shifting operating landscape, coupled with
adoption of monetary and fiscal macroeconomic stabilisation measures.

Banking Sector Concentration
2.4.
Concentration risk in the banking sector, as measured by the Herfindahl-Hirschman
Index1 (HHI) (see Annex 1), has remained consistently low (HHI of less than 1500).
Low concentration creates conditions for the promotion of competitive dynamics with
positive spinoffs to product pricing and diversification. Total banking sector assets
increased from ZW$3,81 trillion in 2022 to ZW$34.41 trillion in 2023. The market share
of the five Domestic Systemically Important Banks’ assets declined from 65.4% in 2022
to 62.40% in 2023. The figure below shows the trend in the HHI from 2017 to 2023.
Figure 6: Herfindahl-Hirschman Index


Source: RBZ (2023)


1 The Herfindahl-Hirschman Index (HHI) is used to assess market competitiveness. A market with an HHI of less
than 1,500 is considered a competitive marketplace, an HHI of 1,500 to 2,500 is moderately concentrated, and
an HHI of 2,500 or greater is highly concentrated.
HHI Index Dec 2017 - Dec 2023


-
Dec-17
Dec-18
Dec-19
Dec-20
Dec-21
Dec-22
Dec-23
HHI
Concentration Threshold

Banking Sector Risks
2.5.
The banking sector has witnessed the emergency of new risks and the amplification of
existing risks occasioned by accelerated digitisation of banking services and as well as
changes in the climate, which has resulted in expanded risk universe of banking
institutions.
2.6.
Notably, technology is reshaping the future of banking. Rapid technological advances
and digitalisation are presenting both opportunities and challenges to the banking
sector. As banking institutions reconfigure their business models, they are also
innovating and coming up with digitally enabled products making increased use of
artificial intelligence. This transformation exposes banking institutions to new emerging
risks and intensification of traditional risks, such as operational risk.
2.7.
The matrix below shows the rating of the various risks that the banking sector is facing.


Table 3: Banking Sector Risk Matrix as at 31 December 2023
Type of Risk
Level
of
Inherent
Risk
Adequacy of
Risk
Management
Systems
Overall
Composite
Risk
Direction of
Overall
Composite
Risk
Credit Risk
Moderate
Acceptable
Moderate
Stable
Liquidity Risk
Low
Acceptable
Low
Stable
Foreign Exchange Risk
Moderate
Acceptable
Moderate
Stable
Interest Rate Risk
Moderate
Acceptable
Moderate
Stable
Strategic Risk
Moderate
Acceptable
Moderate
Stable
Operational Risk
High
Acceptable
Moderate
Increasing
Climate Risk
Moderate
Acceptable
Moderate
Increasing
Legal & Compliance Risk
Low
Acceptable
Low
Stable
Reputational Risk
Low
Acceptable
Low
Stable
Overall Risk
Moderate
Acceptable
Moderate
Stable

Credit Risk
2.8.
Cognisant of the effects of excessive credit growth in an economy, the Reserve Bank
closely monitors credit developments to identify potential systemic risks. While there is
no set threshold for the credit-to-GDP ratio, a rapid growth in credit relative to economic
activity, can be a source of cyclical imbalances and the build-up of systemic risks to
financial stability.
2.9.
The credit-to-GDP gap2 (see Annex 2) was -8.2% as at 30 September 2023, indicating
that credit grew at a slower pace than GDP. There was, however, a spike to 19.9% in
June 2023 explained by a sharp exchange rate adjustment which increased the nominal
value of the total loans compared to the value of output. The figure below shows the
trend in credit-to-GDP gap.
Figure 7: Credit-to-GDP Gap (%)


Source: RBZ (2023)


2 The credit-to-GDP gap is the difference between the credit-to-GDP ratio and its long-run trend.

GAP
Sep-23
Jul-23
May-23
Mar-23
Jan-23
Nov-22
Sep-22
Jul-22
May-22
Mar-22
Jan-22
Nov-21
Sep-21
Jul-21
May-21
Mar-21
Jan-21
Nov-20
Sep-20
Jul-20
May-20
Mar-20
Jan-20
Nov-19
Sep-19
Jul-19
May-19

2.10.
Banking sector asset quality remained strong as at 31 December 2023 as reflected by
the non-performing loans to total loans (NPL) ratio of 2.09% which was below the 5%
international benchmark at the end of the year. The households sector had the largest
proportion of non-performing loans (20.43%) followed by agriculture (14.46%), and
manufacturing (12.57%). The figure below shows the trend in the NPL ratio from
December 2020 to December 2023.
Figure 8: Nonperforming Loans Ratio (%)

Source: RBZ (2023)
2.11.
Credit risk stress tests conducted as at 31 December 2023 showed that the banking
sector was resilient to a migration of performing loans to nonperforming loans arising
from a general deterioration in asset quality, sectoral credit concentration, and
counterparty credit concentration as the banking sector average capital adequacy ratio
remained above the 12% regulatory requirement for a banking institution.
Liquidity Risk

2.12.
Liquidity buffers remained high in 2023, reflected by an average Prudential Liquidity
Ratio of 59.5%, compared to a minimum requirement of 30% for each institution. The
trend in the Prudential Liquidity Ratio from 31 December 2018 to 31 December 2023 is
shown in the figure 9 below.
NPL Ratio

NPL Ratio
International Benchmark

2.13.
The sector’s resilience was further demonstrated by an average Liquidity Coverage
Ratio of 747.05% as at 31 December 2023. Liquidity stress tests conducted also showed
that the banking sector was resilient to liquidity shocks.
2.14.
There is, however, scope for the banking sector to increase financial intermediation to
meet the economy’s credit requirements given a loans to deposit ratio of 49.27% as at
31 December 2023 compared to 55.67% in the previous year.
Figure 9: Banking Sector Average Prudential Liquidity Ratio Trend


Source: RBZ (2024)

Market Risk

2.15.
The money market landscape in Zimbabwe is characterized by limited money market
instruments which has the effect of minimising the banking sector’s exposure to interest
rate risk. In addition, banks’ sources of funds are predominantly retail deposits which
are relatively less interest rate sensitive, while re-pricing assets are mainly loans and
advances and Treasury Bills. Further, prevailing high interest rate spreads cushion
banking institutions’ balance sheets from capital erosion arising from interest rate risk.
2.16.
The banking sector’s net open position to capital rose from -156.7% in 2022 to 59.36%
in 2023, indicating an increase in foreign currency assets relative to foreign currency
liabilities.
2.17.
Stress test results as at December 2023 revealed resilience of the banking sector to
deprecation in the local currency.

74.85


64.37

59.5
59.88

Dec-2023
Jun-2023
Dec-2022
Jun-2022
Dec-2021
Jun-2021
Dec-2020
Jun-2020
Dec-2019
Jun-2019
Dec-2018
%

2.18.
Interest rate stress test results showed that the banking sector was resilient to interest
rate shocks due to the high interest rate spreads and interest rate insensitive deposits.
Strategic Risk

2.19.
Strategic risk plays a pivotal role in banking institutions' earning potential, and overall
success.
2.20.
Strategic risk in the banking sector is increasingly shaped by the rapid adoption of
technology, compelling banks to transform their traditional business models. This
transformation, while offering significant opportunities for innovation, also exposes
institutions to new vulnerabilities. The integrated use of artificial intelligence,
blockchain, and digital platforms has revolutionized customer engagement, streamlined
operations, and enhanced data analytics. However, these advancements come with
heightened cybersecurity threats, regulatory compliance challenges, and the demand
for continuous technological upgrades. Banks must carefully navigate the dependencies
on technology vendors and the potential for obsolescence, ensuring they maintain
robust risk management frameworks to mitigate these strategic risks. Adaptation is
crucial, but so is balancing innovation with the stability and security necessary to uphold
trust and operational integrity in the financial ecosystem.
Operational Resilience
2.21.
Operational disruptions to banking institutions' services have the potential to adversely
affect consumers and market players, undermine the viability of banks, and generate
financial instability. Operational resilience refers to the ability of regulated institutions
to anticipate, respond, recover, and learn from operational disruptions. It also ensures
that critical operations continue even when faced with unexpected disruptions,
maintaining customer protection, shareholder confidence, and regulatory compliance.
2.22.
Banking institutions have been strengthening operational resilience by harnessing
technological innovations such as cloud computing, to contribute to cost reductions,
flexibility, scalability, and standardisation, as well as improvements in security. The
reduction in the branch networks as part of cost rationalisation and improved service
delivery has, however, created new vulnerabilities, such as cyberattacks, increased

complexity in the structure of the banking sector, and concentration risks as a result of
reliance on a small number of service providers, such as internet service providers, all
of which expose the sector to financial stability risks.
2.23.
In 2022, the Reserve Bak conducted a cyber resilience assessment which provided
timely knowledge on the banking sector's ability to perceive, resist and react to
disruptive cyber threats while adjusting, adapting and evolving where necessary. The
assessment indicated that most banking institutions have established governance
structures to oversee cyber resilience programs while senior management is actively
involved in the oversight of and regular reviews of the effectiveness of cyber resilience.
The Reserve Bank also noted that almost all banking institutions have implemented
processes to identify their critical assets and systems. Regular cyber risk assessments
will be conducted to identify potential threats and vulnerabilities.
2.24.
The cyber resilience assessment was also noted that banking institutions have
implemented various security controls to protect their critical assets and systems, as
well as to monitor their networks and systems for potential threats. Regular vulnerability
assessments and penetration testing are conducted to identify and address potential
weaknesses.
Interbank Analysis

2.25.
The interbank network assesses the interconnectedness of institutions that are
participating in the interbank market (banks and deposit-taking microfinance
institutions). An assessment of interconnectedness of the banking sector using the
interbank network analysis depicted low level of interconnectedness in the banking
sector as reflected by a network density3 score of 0.118 in 2023, signifying minimal
systemic risk. There were two banking institutions (Bank 10 and 11) that received


3 The graph density of an interbank network gives an indication of how interconnected the nodes in
the network are. The graph density is calculated as the ratio of the number of actual edges in the
network to the maximum possible number of edges among the nodes. The value ranges from 0 to 1,
where 0 means no connections at all, and 1 represents a fully connected network where every bank
is connected to every other bank.

Blue nodes are net lenders.
Red nodes are net borrowers.
The arrows show the direction of lending from the lender to the borrower.
The size of the arrows shows the relative size of the net exposure to others in the interbank market.
funding from 5 banks as reflected by an in-degree4 score of 5 for each. From the
visualisation below, bank 5 was the largest net lender whilst bank 12 was the largest
borrower in the network.
Figure 10: Interbank Network as at 31 December 2023


2.26.
In the scale of the whole banking sector, interbank exposures constituted a relatively
small share of assets. As at 31 December 2023, total interbank loans accounted for
10.42% of total banking sector assets. A stress test to assess the impact on the lending
banks of a failure by the borrowing banks showed that the lending banks would remain
solvent with their capital adequacy ratios remaining above the regulatory minimum of
12%.


4 In-degree shows how many banks a bank is borrowing from or receiving funds. It is the number of
vertices that are pointing to a node.

30%
Fintech Developments
2.27.
To ensure that fintechs operate within the regulatory framework, the Reserve Bank
licenses all fintechs operating in the local banking sector. During the period under
review, the Reserve Bank received forty-five (45) product applications from financial
institutions and other prospective payment system providers for licensing.
2.28.
The applications included twenty-two (22) approved products, twenty (20) provided
with guidance, one (1) product under consideration whilst two (2) were rejected.
Regulatory Sandbox
2.29.
As of December 31, 2023, a cumulative total of twenty-three (23) applications had been
received by the Reserve Bank for sandboxing where two (2) were successfully tested
and exited the sandbox while the remaining were offered guidance, and some were
rejected. The applications received in the Regulatory Sandbox were largely focusing on
financial inclusion products, retail payments and equity crowdfunding.
Figure 11: Distribution of Applications to the Regulatory Sandbox as of 31 December 2023
Financial Inclusion
26%
Retail Payment
18%
Not Specified
10%
Equity Crowdfunding
10%
Money transfer
8%
Wealth Management
5%
APIs
5%
Smart Contracts
3%
P2P Lending
3%
Regtech
3%
Mobile Money Services
3%
Financial Advisory
3%
Digital ID

Percentage Distribution of Applications per category
Source: RBZ (2023)

2.30.
In the insurance segment, the Insurance and Pensions Commission, together with the
short-term insurance industry and some partners, developed a product called the
Farmers Basket piloted in Goromonzi District of Mashonaland East. The product is meant
to improve small holder farmers’ resilience against the impact of climate change.

2.31.
Going forward, IPEC intends to develop a regulatory sandbox as a way of encouraging
innovations in the insurance industry space.
2.32.
In the capital markets, there were three (3) engagements on expression of interest by
fintechs to register mobile and internet-based products designed to automate the end-
to-end processes of the entire capital markets. No fintech licenses were however issued
during the year.

Developments in the Microfinance Sector
2.33.
The microfinance sector registered significant growth in sector capitalization, net profit
and number of active clients. The sector experienced a substantial 16-fold increase in
outstanding loans from $46.01 billion at the end of 2022 to $741.16 billion at the end
of 2023. The increase was partly attributed to the operationalisation of the collateral
registry system which facilitated the usage of moveable assets as security for funding
from financial institutions.
2.34.
Reflecting the sector’s vibrancy, the total number of registered microfinance institutions
increased from 206 as at 31 December 2022, to 238 as at 31 December 2023,
comprising 230 credit-only microfinance institutions and eight (8) deposit-taking
microfinance institutions.
2.35.
Micro lending has continued to be concentrated in consumption loans to civil servants
with elements of over-indebtedness of some clients. It has, however, been established
that most of the loans categorised as consumption loans are essentially employed in
income generating activities which mitigates the risk to financial stability. The regulatory
authorities continue to work with the microfinance apex bodies in transforming the
microfinance business model with a view to maximise the sector’s contribution to
economic development and financial stability.
2.36.
The microfinance sector remained operationally self-sufficient during the year as
reflected by an improvement in the average operational self-sufficiency (OSS) ratio of
184.46%, from 167.51% in the previous year. During the period under review, the Bank
continued to monitor a number of microfinance institutions which were non-compliant

with applicable regulatory capital thresholds. Sustainability and capitalization of
microfinance institutions are essential for long-term stability.
Consumer Protection Initiatives

2.37.
Pursuant to the consumer protection objectives, the Reserve Bank continued to monitor
and enforce compliance by banking and microfinance institutions with the legal and
regulatory framework to ensure fair and ethical practices within the sector as well as
minimising negative impact of the financial sector.
2.38.
During the period under review, the Reserve Bank in collaboration with the Insurance
and Pensions Commission, the Securities and Exchange Commission of Zimbabwe, the
Postal and Telecommunication Regulatory Authority of Zimbabwe and financial service
providers, participated in outreach programs, as part of ongoing consumer education
programs.
Regulatory Enhancements in the Banking Sector

2.39.
The Reserve Bank continued to strengthen the legal and regulatory framework and
market conduct rules as part of ongoing regulation of the banking sector and payment
systems. Guidance was also provided to service providers to enhance cyber security
practices and resilience on an ongoing basis.
2.40.
In recognition of the need to create strong, resilient and inclusive financial institutions
that contribute meaningfully to sustainable economic development and attainment of
Sustainable Development Goals, the Reserve Bank continues to work closely with
financial institutions in the adoption and implementation of sustainability standards. All
the five (5) domestic systemically important banks are participating under the
Sustainability Standards Certification Initiative being spearheaded by the European
Organization for Sustainable Development.
2.41.
In April 2023, the Bank issued a Climate Risk Management Guideline for the banking
sector. The guideline aligns with international developments and aims to enhance the
resilience of the banking system against climate-related risks. The guideline emphasizes

the adoption of robust climate risk management governance, risk management,
reporting and monitoring and disclosure practices and methodologies.
2.42.
As part of ongoing efforts to operationalise the Climate Risk Management Guideline,
the Bank conducted a survey to determine the extent to which financial institutions had
put in place requisite policies, governance arrangements and risk management systems.
The survey determined that most of the financial institutions had assessed the potential
impact of climate risk on their balance sheets, and are also developing climate risk
management policies. Sound climate risk management in the financial sector will ensure
that physical and transition risks are proactively mitigated with positive spinoffs on
financial stability.
2.43.
The Reserve Bank joined the Network for Greening the Financial System in December
2023, a development that is expected create a valuable platform to interact with other
supervisors across the globe in building supervisory capacity in managing sustainability
and climate related risks, strengthening climate and environmental risk management
practices and guiding transition to a low carbon economy.
2.44.
In July 2023, the Reserve Bank of Zimbabwe issued a Model Risk Management
Prudential Standard in response to the growing reliance of regulated institutions
on modelling. As operations and activities become more intricate and varied, this
standard emphasizes sound development, implementation, and rigorous model
validation
as
crucial
components
of
effective
model
risk
management.

3.
CAPITAL MARKETS PERFORMANCE
3.1.
The capital markets infrastructure contributes to financial stability by providing a
platform for the efficient and orderly trading of securities, and by facilitating the flow
of information among market participants.
3.2.
The capital market continued to depict resilience in 2023 notwithstanding the failure by
some Securities Market Intermediaries (SMIs) to comply with requisite capital standards
aimed at mitigating operational, counterparty, and financial risks. The Zimbabwe Stock
Exchange’s (ZSE) market capitalization increased by 722% from ZW$2.04 trillion in
2022 to ZW$16.8 trillion in 2023. Notwithstanding the noted development, there was a
downturn in trade volumes and the number of trades, with a decrease in shares traded
from 2,294,799,462 in 2022 to 1,941,348,361 in 2023. Such fluctuations in market
activity can impact market liquidity and investor sentiment, which are important
elements for financial stability.
3.3.
The Zimbabwe Stock Exchange (ZSE) turnover for the year ending 31 December 2023
at ZW$555 billion, marked a substantial 321% increase from the previous year's
ZW$132 billion. Increased turnover largely reflected the impact of exchange rate
depreciation on the prices of traded stocks. The aggregated turnover on the Victoria
Falls Securities Exchange (VFEX) increased by 114% to USD26.3 million in 2023, from
US$12.3 million in 2022. Market capitalization for the VFEX closed the year at USD1.208
billion from USD565 million in 2022. The figure below shows the trend in ZSE volume
of shares traded from 2019 to 2023.

Figure 12: Volume of Shares Traded in Millions (Zimbabwe Stock Exchange 2019-2023)


Source: SECZim (2023)


Risks to the Stability of the Capital Markets

3.4.
The table below shows the identified financial stability risks and mitigants thereof, in
the domestic capital markets.


-

NO OF SHARES TRADED
MILLIONS

Table 4: Risks to the Stability of the Capital Markets


Risk Description
Risk Colour
Code
Mitigation Measures
Direction
Concentration
Risk
• Concentration risk is more pronounced in the
investment
management
and
stockbroking
businesses. Within the Asset Management sector,
70% of the Funds Under Management (FUM) is held
by only five out of the twenty-seven operating
investment management firms.
• SECZim continues to promote new entrants with greater capacity to
undertake asset management and stockbroking businesses

Systemic Risk
• The capital markets industry is highly integrated with
banking and insurance entities contributing to
aggregate systemic risks.
• Constant monitoring of systemically important SMIs.
• Constant interaction with peer regulators to avert industry-wide systemic
risk.
• Well capitalized and liquid banks and SMIs.

Geopolitical and
Economic Risk
• Inflationary pressures continue to be felt in the
economy in 2023.
• Slowdown in Zimbabwe’s major trading partner,
South Africa, poses significant risks on the prospects
of Zimbabwe’s economy and the local capital market.
• The increasing emigrations of locals including
potential investors and professionals contributes to
capital outflows which subsequently affect Securities
Market Intermediaries ( SMIs) financial stability.
• The Israeli-Gaza and Russia-Ukraine conflicts
continue to affect economic prospects in sub-
Saharan Africa via the trade channel.
• SECZim continues to implement and employ robust prudential supervision
mechanisms to ensure market stability.
• SECZim continues to deploy market development strategies to ensure
growth and diversification in the market.
• Approval of offshore investments to enable investment managers to
diversify risk.

Climate and ESG
Risk
• Increasing climate related risks e.g. cyclones, El Nino
induced drought in the 2023/4 cropping season.
General reluctance to adopt ESG reporting standards
by market players.
• Limited availability of comparable, granular climate-
related data limit supervisory and regulatory
analysis.
• SECZim is working with PAAB in promoting sustainability reporting.
• Increasing awareness on the effects of climate change and the ned to
promote sustainable financing.

Operational
Risk
• Increased human capital drain.
• Power challenges have impacted on the viability of
Securities Market Intermediaries
• SECZim continues to promote and enforce a tech-driven market by
ensuring automation of activities and the market enabling firms to work
efficiently.

Risk Description
Risk Colour
Code
Mitigation Measures
Direction
• Adoption of technology and digital platforms in
capital markets is transformative but exposes the
market to cyber risks.
• Increase in fraudulent technology based alternative
investment schemes e.g. E-creator and Bitcoin
scams.
• SECZim assesses Cyber risk preparedness for SMIs during onsite
prudential inspections. On-site inspections have largely focused on
adequacy of IT infrastructures and security.
• Promotion of cyber security awareness.
• Enhanced supervision to ensure timely detection, response, prevention,
and recovery by SMIs.

Key:
High
Increasing
Moderate
Stable

Low
Decreasing

Securities Dealing Firms

3.5.
Ten (10) out of twenty-one (21) licenced entities were inadequately capitalised as at
31 December 2023, whilst nine (9) institutions reported negative earnings for the fourth
quarter of 2023 threatening their viability thereby increasing financial stability risks
arising from the capital markets.
Capital Markets Structure
3.6.
A summary of the total number of licensed and registered institutions as at 31
December 2023 (Securities Market Intermediaries) is shown in the Table below.
Table 5: Capital Markets SMIs
Licence
Category
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1

Q2 2023
Q3 2023
Q4 2023
Dealing firms

Investment
advisers

Investment
managers

Securities
exchanges

CSDs

Trustees

Custodians

Transfer
secretaries

Total SMIs

Total CIS

Grand Total
(SMIs
&
CIS)

Unit Holders

Source: SECZim (2023)

Capital Markets Consumer Protection and Other Regulatory Developments
3.7.
Securities and Exchange Commission of Zimbabwe issued the following guidelines and
directives for the securities industry in 2023:
i. Anti-Money Laundering, Combating the Financing of Terrorism and Proliferation
Financing (AML/CFT/CPF) Guidelines for Collective Investment Schemes In
Zimbabwe; and
ii. Notice to Securities Market Intermediaries on Levy Declarations Denominated in
Foreign Currency.
3.8.
As part of consumer protection initiatives during the review period, the regulatory
agency also launched an online portal for unclaimed shares where members of the
public can claim their shares.

4.
INSURANCE AND PENSIONS INDUSTRY DEVELOPMENTS

4.1.
Notwithstanding the challenging operating landscape, particularly during the latter half
of the year marked by rising inflation, the insurance sector maintained a general state
of soundness, contributing to overall financial stability. Inflationary pressures, however,
eroded the value for policyholders and members, presenting a potential risk to the
sustained financial well-being of the sector. Insurance companies, in particular,
experienced a squeeze on profitability due to heightened operating expenses.
4.2.
The Insurance and Pensions industry’s assets grew from ZW$1.1 trillion in December
2022 to ZW$12.18 trillion as at December 2023. In US$ terms, assets increased from
US$1.65 billion to US$2 billion during the period under review. Total insurance business
written amounted to ZW$1.22 trillion comprising of ZW$54.24 billion (53%) from direct
short term insurance players and ZW$571.17 billion (47%) from direct life assurers.
4.3.
All insurance companies were compliant with minimum capital requirements, which are
presented in Table 6 below, while about 64% of the defined benefit funds (constitute
only 4% of total funds), were underfunded.
Table 6: Insurance Minimum Capital Requirements

Insurance Business
Amount (USD/ZWL Equivalent)
Short term non life
US$750 000
Life assurers with funeral
US$2 million
Funeral Assurers
US$500 000
Micro Insurers
US$100 000
Brokers
US$100 000
Reinsurers
US$2 million

Source: IPEC (2023)


4.4.
The pre-2009 Pensions Compensation regulations were gazetted on 29 September 2023
through Statutory Instrument 162 of 2023, paving way for the compensation of pension
scheme members in respect of value lost during the pre-2009 period. Pension funds
and administrators were given up to 31 December 2023 to prepare compensation
schemes as guided by the gazetted regulations. At the close of the year, the

compensation plans submitted by the pension funds and administrators were under
IPEC consideration.
Risks to the Insurance and Pensions Industry
4.5.
The major risks identified were macroeconomic, reputational, concentration and
business risks, which were rated high, while credit and solvency/capital risks were rated
moderate.
4.6.
Macroeconomic risk was rated high on account of inflationary pressures, low
disposable incomes and aggregate demand impacting on pension and insurance uptake
and industry viability. The informalisation of the economy also impacted negatively on
pension coverage and insurance penetration though presenting an opportunity in
microinsurance and micro-pensions.
4.7.
Reputational risk was mainly due to low pension benefits that do not meet reasonable
expectations – benefits averaging US$42 per month and failure by funeral industry
players to fully comply with the relevant regulations.
4.8.
Business risk was mainly due to significant changes in the business environment,
including the proposed takeover of Third-Party Motor Insurance Book by the
Government, which is likely to result in about 8 companies becoming insolvent.
4.9.
Concentration risk was rated high given the high concentration on funeral products
by life assurers, the oligopoly nature of life assurance business sector as well as
concentration on third party motor insurance by short-term insurers.
4.10.
Credit risk was rated moderate due to the existence of premium debtors and
contribution arrears, challenges in reinsurance recoveries and unfavourable reinsurance
terms.
4.11.
Solvency/capital risk was rated moderate due to over 50% of Defined Benefit
schemes being underfunded as well as the potential impact on insurance companies’
capital position when implementing the Zimbabwe Risk Integrating Capital (ZICARP)
regime.

4.12.
Notwithstanding the identified risks for the insurance and pensions sector being rated
high and moderate, they do not pose a significant threat to financial sector stability.
4.13.
The table below shows the identified risks that threaten the insurance and pensions
industry as well as their mitigants.

Table 7: Insurance and Pensions Key Risks and Mitigants - December 2023


Type of Risk
Inherent
Risk
Impact
Risk Mitigants
Residual Risk
Trend of Risk
Macroeconomic Risk
inflation eroding long term savings
High
Low confidence
Promote investments in inflation
proofing assets.
High

Repricing of funeral products due to
macroeconomic fundamentals.
Continued applications
for paid up status and
dissolution of pension
funds.
Indexation
of
ZW$
premiums/contributions.
Low
disposable
incomes
and
aggregate
demand
impacting
on
pension and insurance uptake and
industry viability.
Informalisation of the economy
impacting on pension coverage and
insurance penetration
Low uptake of insurance
and pensions
Constant reviews of strategies to
align
with
macroeconomic
outlook.
Product
development
and
introduction
of
US$--indexed
products.
Extension of the multicurrency
regime to 2030.
Engagements
with
monetary
and fiscal authorities.
Tapping into the opportunities
in the informal sector through
product and model reviews,
issuance of the Micropensions
Framework and review of the
Microinsurance Framework.
Reputational Risk
Low pension benefits that do not meet
reasonable expectations – benefits
averaging US$42 per month.
Outcry over funeral business repricing
Failure to protect members of
troubled or failed institutions (e.g.
High
Low confidence in the
sector.
Continued applications for
dissolutions
Low uptake of insurance
and pensions
Resolution
of
customer
complaints.
Stakeholder management.
Resolution of legacy issues e.g.
through compensation for lost
values
Establishment of a
policyholder/member protection
scheme.
High

Type of Risk
Inherent
Risk
Impact
Risk Mitigants
Residual Risk
Trend of Risk
Zisco and CSC pensions schemes) due
to absence of a policyholder/member
protection scheme.
Business Risk
Self-insurance as an alternative to
conventional insurance.
High
High
number
of
applications

for
dissolutions,
paid
up
status from pension funds.
Innovative solutions to enhance
policyholder
and
member
preferences.
High

Competition e.g. increased use of
Bancassurance.
Policyholder preferences.
Changes in the business environment
e.g. takeover of the Third-Party Motor
Book by the Government.
Low uptake of insurance
and pensions
Insolvency
of
some
entities
Consumer awareness campaigns
Constant reviews of business
models
to
align
with
macroeconomic outlooks.
Balance sheet alignments to
US$.
Stress testing.
Concentration Risk
85% of products for life assures are
funeral products.
High
Potential Disruption of the
only product being sold in
the life insurance industry.
Issuance of funeral directive to
reintroduce term policies.
High

Industry
controlled
by
a
few
companies in terms of revenue and
assets.
Third
Party
Motor
Insurance
accounted for 62% of the Motor book
and 25% of short-term insurance
revenue – possible takeover of the
Third Party Motor Insurance.
Short nature of annual
renewable funeral policies
impacts
adversely
on
national
savings
mobilisation.
Liquidity challenges
Insolvency of some
entities
Innovation and underwriting of
other lines of business e.g.
agriculture insurance.
Risk
based
supervision
for
systemically important entities.
Capping
Third
Party
Motor
Insurance
for
short
term
insurance companies
Investments concentrated in equities
and investment property.
Diversification of investments
e.g. through offshore
investments and increase in
exposure to alternative assets.
Credit Risk
Premium Debts (ZW$166 billion) –
poor premium collection
Moderate
Delayed
settlements
claims
Enforcement of the No Premium
No Cover regulations.
Enforcement
of
the
Claims
Settlement Circular.
Moderate

Type of Risk
Inherent
Risk
Impact
Risk Mitigants
Residual Risk
Trend of Risk
Reinsurance
counterparties
–
ineffective recoveries from reinsurance
and unfavorable reinsurance terms.
Increasing contribution arrears
Low capacity of pension
funds to payout pension
benefits in future
Impact on operations of
pension funds and
insurance companies
Counterparty risk assessment of
reinsurers.
Garnish powers in new Pensions
and
Provident
Funds
Act
[Chapter 24:32].
Naming and shaming defaulting
sponsoring employers through
publications.
Undertake regular liquidity
stress testing and analysis.
Solvency/Capital Risk
Regulation and changing standards
e.g. adoption of ZICARP, US$ indexed
capital.
Low funding levels for Defined Benefit
funds - 23 out of 36 DB funds (64%)
are under funded
Moderate
Enforcement of regulations and
standards
Engagement of sponsoring
employers to liquidate deficits
for Defined Benefit Funds.
Moderate


Key:
High
Increasing
Moderate
Stable

Low
Decreasing

Insurance and Pensions Sector Consumer Protection and Other Regulatory
Developments
4.14.
During the year under review, the Insurance and Pensions Commission reviewed the
Product Approval Framework to ensure that products launched in the market meet
requirements that guarantee consumer protection.
4.15.
Further, the following instruments and activities also contributed to the Commission’s
consumer protection initiatives:
4.16.
Funeral Directive, which provides minimum guiding principles to funeral underwriters
on effective systems in the design and distribution of funeral products for the protection
of policyholders;
4.17.
Guideline on Post-retirement Products and Re-registration, which calls for a re-
registration of all post-retirement products in the market. The re-registration process is
aimed at ensuring alignment with the new Pension and Provident Funds Act [Chapter
24:32] and the Treating Customers Fairly Framework;
4.18.
Consumer education and awareness through social media, road shows, radio
programmes and exhibitions;
4.19.
Enforcement of the conduct of Annual General Meetings by pension funds, including
attendance of the meetings in an observer capacity; and
4.20.
Enforcement of the issuance of benefit statements to pension fund members.

4.21.
On the financial reporting front, the insurance and pensions industry shifted from
International Financial Reporting Standard 4 to International Financial Reporting
Standard (IFRS) 17 reporting as at 31 December 2023. IFRS 4 allowed insurers to use
their own interpretations of revenue recognition and calculation of reserves whilst IFRS
17 sets out a specific and standardized approach to accounting for insurance contracts
to enhance financial reporting quality and comparability across different insurers.
4.22.
The Insurance and Pensions Commission also facilitated the issuance of Statutory
Instrument 81 of 2023, Insurance (Amendment) Regulations, 2023 (No. 26) to minimise

risk in the insurance sector posed by high premium debtors which threatened the
sector’s liquidity and soundness.

5.
DEPOSIT INSURANCE
5.1.
The Deposit Protection Corporation of Zimbabwe (DPC) continues to play an important
role in maintaining financial stability by providing a safety net for depositors, which is
essential for a healthy economy and financial system.
Risks to the Deposit Protection Corporation Fund
5.2.
The DPC Fund is exposed to two main risks in fulfilment of its mandate of protecting
depositors as shown in Table 8 below.
Table 8: DPC Risks and Mitigation

Type of Risk
Inherent
Risk
Impact
Risk Mitigants
Residual
Risk
Trend
of
Risk
Investment Risk
This is the risk of loss arising from
investments made by DPC.
Main source of income i.e.
premiums, is currently invested in
stock and money markets.
High
Stunted growth of the
Fund due to limited high
earning investments.
Loss of value of ZWL
investments due to
currency depreciation.
Diversification of
investment portfolio
to include asset
classes, such as
stocks, money
market, gold coins
and real estate, to
reduce its overall
risk exposure.
Monthly premiums
in US$ to preserve
value.
Moderate

Fund Adequacy Risk
This is the risk to the Corporation’s
fulfilment of its mandate of
protecting depositors that is caused
by an insufficient DPC Fund.
The DPC Target Fund is currently
equal to 2% of the total deposits in
the banking sector.
High
Fund Inadequacy would
affect the Corporation’s
ability to compensate
depositors promptly.
Adoption of robust
investment
strategies
Harmonisation of
ZWL & FCA
premiums at 0.30%
from 31.12.2023.
Moderate


Key:
High
Increasing
Moderate
Stable

Low
Decreasing

5.3.
As at 31 December 2023, membership to the DPC Scheme comprised 26 contributory
institutions (CIs). Table 9 below shows membership to the scheme:
Table 9: Membership to the DPC Scheme as at 31 December 2023

Type of Institution
Number
Commercial Banks

Building Societies

Savings Bank

Infrastructure & Development Bank

Deposit-Taking Micro-finance Institutions (DTMFIs)

Total

Source: DPC (2023)
Cover Level - Banking Institutions
5.4.
As at 31 December 2023, 98.1% of the depositor accounts in contributory banking
institutions were fully covered at a cover level of ZW$1,000,000 per deposit class per
bank. At the cover level of USD1,000 per deposit class per bank for foreign currency
deposits, 96.3% of the depositors were fully covered.
5.5.
The deposit protection coverage for local currency and FCA accounts in the banking
institutions is shown in Table 10 and Table 11 below as at December 2023.
Table 10: Deposit Protection Coverage for Banking Institutions (ZW$) as at 31
December 2023

Item
Number/Amount
Cover Level
Total Number of Deposit Accounts
6.8 million
100%
Total Number of Deposit Accounts Fully Covered.
6.6 million
98.1%
Total Number of Deposit Accounts Partially Covered.
127.4 thousand
1.9 %
Value of Deposits in Fully Covered Accounts
ZW$ 162.3 billion
3.9%
Value of Deposits in Partially Covered Accounts.
ZW$ 4 trillion
96.1%
Total Value of Insured Deposits
ZW$ 289.7 billion
6.9%
Total value of deposits
ZW$ 4.2 trillion
100%
Source: DPC (2023)

Table 11: Deposit Protection Coverage for Banking Institutions (USD) as at 31
December 2023

Item
Number/Amount
Cover
Level
Total Number of Deposit Accounts
1.8 million
100%
Total Number of Deposit Accounts Fully Covered.
1.7 million
96.3%
Total Number of Deposit Accounts Partially Covered.
64.3 thousand
3.7%
Value of Deposits in Fully Covered Accounts
USD 74.2 million
3.8%
Value of Deposits in Partially Covered Accounts.
USD 1.9 billion
96.2%
Total Value of Insured Deposits
USD 138.5 million
7.1%
Total value of deposits
USD 2.0 billion
100%
Source: DPC (2023)
Cover Level - DTMFIs
5.6.
At the maximum deposit protection cover level of USD500 per deposit class per bank,
99.9% of the FCA deposit accounts in the DTMFI sector were covered in full. At the
cover level of ZW$100,000 per deposit class per bank, 99.4% of the deposit-taking
microfinance institutions (DTMFIs) depositors were fully covered as shown in Table 12
and Table 13.
Table 12: Deposit Protection Cover for DTMFIs as at 31 December 2023 (ZW$)

Item
Number/Amount
Cover
Level
Total Number of Deposit Accounts
274,218
100%
Total Number of Deposit Accounts Fully Covered.
272,551
99.4%
Total Number of Deposit Accounts Partially Covered.
1,667
0.6%
Value of Deposits in Fully Covered Accounts
ZW$214.9 million
2.02%
Value of Deposits in Partially Covered Accounts.
ZW$ 10.4 million
97.98%
Total Value of Insured Deposits
ZW$ 381.6 million
3.6%
Total Value of Deposits
ZW$ 10.6 billion
100%
Source: DPC (2023)

Table 13: Deposit Protection Cover for DTMFIs as at 31 December 2023 (USD)

Item
Number/Amount
Cover Level
Total Number of Deposit Accounts
2.2 million
100%
Total Number of Deposit Accounts Fully Covered.
2.2 million
99.98%
Total Number of Deposit Accounts Partially Covered.

0.02%
Value of Deposits in Fully Covered Accounts
USD 9.2 million
52.35%
Value of Deposits in Partially Covered Accounts.
USD 8.4 million
47.65%
Total Value of Insured Deposits
USD 9.4 million
53.5%
Total value of deposits
USD 17.6 million
100%
Source: DPC (2023)

6.
NATIONAL PAYMENT SYSTEMS

Payment Systems Architecture
6.1.
The national payment systems remained stable and resilient during the period under
review and are projected to maintain the same momentum in 2024 and into the future
based on the Real-Time Gross Settlement’s (RTGS) operational uptime, effective
oversight, and supervision by the Bank.
6.2.
The payment systems comprising twelve (12) payment system providers and twenty-
five (25) participant banks including three regional payment platforms facilitated the
transactional activities in the economy.
6.3.
Figure 13 below shows the payment systems architecture as at 31 December 2023.

Figure 13: Payment Systems Architecture


Source: RBZ (2023)


Digital Payment Systems Values and Volumes
6.4.
The significant growth in various transactional streams, showed that the payment,
clearing and settlement systems operated efficiently with the financial institutions, non-
financial institutions, and the transacting public remaining confident in the payment
systems.

PAYMENT PLATFORM
NO. OF PARTICIPANTS

6.5.
Accordingly, digital payment systems transaction values continued on an upward
trajectory as shown in Figure 14 with an average monthly growth of 27% in 2023. The
volume of transactions recorded an average monthly increase of 1% in 2023.
Figure 14: Digital Payment Systems Values and Volumes for 2023


Source: RBZ (2023)
Real Time Gross Settlement (RTGS)
6.6.
Improved performance was witnessed on the Zimbabwe Electronic Transfer and
Settlement System (ZETSS) and the Zimbabwe Real Time Gross Settlement System
(RTGS).
6.7.
In this regard, RTGS transaction values increased by a monthly average of 25% to
ZW$26.4 trillion in December 2023 from ZW$3.29 trillion in January 2023 as shown in
Figure 15.


Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23
TRANSACTION VOLUMES IN MILLIONS
TRANSACTION VALUES IN BILLIONS (ZW$)
Values in billions (ZW$)
Volumes in millions

Figure 15: RTGS Monthly Values and Volumes 2023


Source: RBZ(2023)
6.8.
The RTGS system achieved an average uptime of 96% during the period under review.
The uninterrupted and smooth flow of the system which transmits high value
transactions, continued to increase the confidence level in the market.
SADC-RTGS
6.9.
The SADC-RTGS system was upgraded to comply with ISO 20022 which changed the
payment messages being sent and received via the Society for Worldwide Interbank
Financial Telecommunications (SWIFT) from the legacy MT (message type) format to
the new MX (message type XML) format, which is more transparent, holds more data
and is expected to boost interoperability between banks. In this regard, local banks
were advised to align with the migration program as failure to migrate will leave such
participants out of the SADC- RTGS regional payment system.
Risks to the National Payment Systems
6.10.
Cyber security and compliance risks were identified as key and critical risks during the
period under review.
Cyber Security Risk
6.11.
The heightened dependency on digital financial services platforms has exacerbated the
risks arising from cybersecurity threats and vulnerabilities.

Values
Volumes
VALUES (BILLIONS)
VOLUMES (MILLIONS)

6.12.
Consequently, the Bank continues to enforce provisions in the Risk Based Cyber Security
Guideline (2020) [RBCS] to mitigate cyber threats within the payment, clearing, and
settlement landscape. During the year, the authorities continued to observe some cyber
threats intended to exploit vulnerabilities in the financial market infrastructures.
6.13.
The RBCS provides minimum measures to guide the effective implementation of robust
technological infrastructures and undertake periodic system vulnerability and
penetration testing. This among other measures promotes stability and confidence in
the payment ecosystem.
Compliance Risk
6.14.
Payment systems compliance is a key aspect of ensuring the credibility and reputation
of the regulated entities as well building public interest objective pillar.
6.15.
Most of the payment services providers are now aware of and are largely implementing
compliance measures to promote financial stability and inclusivity among others. Low
compliance culture by some operators was noted during the review period and the Bank
will, continue to step up efforts to ensure commensurate compliance levels are attained.

7.
ANTI-MONEY
LAUNDERING,
COMBATING
OF
THE
FINANCING
OF
TERRORISM
AND
COUNTERING
PROLIFERATION FINANCING (AML/CFT/CPF)
7.1.
Robust anti-money laundering, combating financing of terrorism and proliferation of
weapons of mass destruction (AML/CFT/CPF) frameworks are pivotal in fostering
financial stability through the insulation of financial resources from illicit proceeds
generated by criminals thereby promoting economic stability in the country by creating
confidence, enhancing investment, as well as promotion of economic growth.
Major Money Laundering Risks

7.2.
The prevalence of cash-based transactions presents money laundering risks. According
to the 2020 National Risk Assessment report, smuggling, tax evasion, fraud, illegal
dealing in precious stones and corruption continued to be the major crimes fuelling
money laundering activities in the country.
7.3.
According to the report, most of the proceeds of these financial crimes are being
laundered through real estate, car dealers and precious metals, mostly in cash. Money
laundering through the banks and formal financial channels is limited due to the
increasing controls implemented by financial institutions as well as the strong supervisory
regimes.
7.4.
The country launched its third money laundering National Risk Assessment (NRA) in
October 2023, to refresh and update the stakeholders’ understanding of the money
laundering risks facing the country. The exercise, which is expected to be completed in
the third quarter of 2024, will identify the emerging money laundering trends.
7.5.
The country is using the World Bank money laundering National Risk Assessment Tool.
In line with new global approaches, tax related crimes and environmental crimes are
being given special attention in recognition of their growing contribution to money
laundering activities.
7.6.
The country is also, for the first time, undertaking an assessment of the money
laundering risks posed by virtual assets. The resultant report in 2024 will inform and

recommend an appropriate regulatory framework for virtual asset service providers in
order to mitigate the identified risks.
Supervisory Approach

7.7.
The financial sector supervisors have continued to strengthen AML/CFT risk based
supervision systems. Most of the supervisors, including the Reserve Bank of Zimbabwe,
Insurance and Pensions Commission and Securities and Exchange Commission of
Zimbabwe now have dedicated AML/CFT supervision units to ensure sufficient attention
and focus is given to AML/CFT issues.
7.8.
The supervisors have continued to collaborate and coordinate with each other activities
under the umbrella of the National Task Force on AML/CFT.
7.9.
Arising from the ongoing strengthening of AML/CFT supervision, understanding of money
laundering and terrorism financing risks and AML/CFT compliance levels by the regulated
institutions has been increasing.
7.10. The Bank conducted AML/CFT risk-based onsite examinations that noted a few
deficiencies in the institutions that were being examined.
7.11. The licensing framework for banking and microfinance institutions has been enhanced
to incorporate AML/CFT requirements on market entry, including identification of
beneficial owners of legal & natural persons and identification of sources of funds &
wealth of significant shareholders.
7.12. Capacity building efforts continue as part of measures to enhance the effectiveness of
AML/CFT supervision of banks and microfinance institutions.
AML/CFT Legal Framework

7.13. The country’s AML/CFT legal and regulatory framework is largely aligned with
international standards. The country is rated fully compliant or largely compliant with 36
out of the FATF’s 40 Recommendations. Three Recommendations are rated partially
compliant while only one recommendation is rated non-compliant.
7.14. Work is underway to address the few outstanding deficiencies in 2024.

8.
OUTLOOK

8.1.
The global economy is anticipated to sustain its growth rate at 3.2% (World Economic
Outlook, April 2024), despite ongoing financial strains in 2024. The persistence of tight
global financial conditions, combined with the potential for climatic disturbances and
escalating geopolitical tensions, are envisaged to impact negatively on global financial
stability in the form of increased cost of credit and deterioration in debt servicing capacity
of households and corporates. These factors are expected to continue challenging the
resilience and adaptability of the global financial system, highlighting the importance of
vigilant monitoring and proactive measures to mitigate risks to financial stability.
8.2.
The domestic economy’s growth is expected to decline to 3.5% in 2024, partly due to
the adverse effects of El Nino-induced drought conditions on the 2023/2024 summer
cropping season. The expected decline in agricultural output and a decline in mineral
commodity prices will negatively impact on the quality of loans extended to these sectors.
Economic growth is key in supporting financial institutions’ build-up of capital and
enhancing their resilience against potential economic downturns or financial shocks.
8.3.
Fiscal and monetary policy measures including the introduction of the gold backed digital
tokens, and the promulgation of Statutory Instrument 218 of 2023 extending the tenure
of the multicurrency system to 31 December 2030, the introduction of a backed by
foreign currency reserves, gold and other precious minerals in April 2024, are expected
to reduce uncertainty within the foreign exchange market and the volatility of the
exchange rate.
8.4.
The outlook of the banking sector is positive on the back of strong financial soundness
indicators and strong regulatory environment. The national payment systems are
projected to remain resilient, owing primarily to the Reserve Bank's strong management
and supervision of Real-Time Gross Settlement (RTGS) operations.
8.5.
The insurance industry is projected to experience growth as a result of ongoing
recapitalization efforts and strategic market development initiatives such as tapping into
the opportunities in the informal sector through product and business model reviews.

8.6.
The capital market is expected to continue on a growth path as a result of currency
stabilisation efforts which have stimulated trading activity on the Zimbabwe Stock
Exchange. The relaxation of vesting period rules has also spurred trading on the
Exchange as well as equity exposures across the broader economy. New products such
as Contracts for Differences (CFD) as well as expansion of boutique products such as
REITS will also underpin growth of the capital markets industry.

ANNEX 1: Herfindahl-Hirschman Index
The Herfindahl-Hirschman Index is an index that measures market concentration. It is
computed as follows
n
HHI = s2 + s2 + ⋯ + s2 = ∑ s2

n
i
i=1
Where si is a banking institution’s share of total banking sector assets.
HHI of between 1 500 and 2 500 points to moderate concentration, while HHI greater
than 2 500 points to high concentration.
ANNEXES

ANNEX 2: CREDIT-TO-GDP

One of the early warning indicators of domestic banking distress is the Credit-to-GDP ratio (BIS Quarterly
Review, March 2016). This is the difference between the current private credit ratio as a percentage of GDP
and its trend value estimated using the HP filter.
The credit-to-GDP ratio for Zimbabwe was estimated using quarterly data for the period 2019 first quarter
to 2023 third quarter. Credit to the private sector as compiled in the monetary survey was used to proxy
total credit whilst quarterly GDP was obtained from the Zimbabwe Statistical Agency (Zimstat).
The Hodrick and Prescott Filter (1980,1997) (HP Filter) was used to separate the long run trend and cyclical
components of the credit-to-GDP series. The HP filter strives to find a trend component, given an
appropriate smoothening parameter λ, that minimises the following function,

T
T−1
∑(yt − rt)2 + λ ∑(rt+1 − 2rt + rt−1)2
t=1
t=2

Where T denotes the sample size, λ is a (nonnegative) smoothing parameter that for quarterly data is often
chosen to equal 1600.

ANNEX 3: Macroeconomic Indicators for Zimbabwe

REAL SECTOR
Real GDP at 2019
Market prices (Z$'m)

GDP at Market Prices
% changes

GDP per capita

PRICES
Month-on-Month (end
period) %

Annual Inflation (end
period) %

Annual Inflation
(period average) %

EXTERNAL SECTOR
Trade Balance (US$M)

Current a/c balance
(US$M)

Capital a/c balance
(US$M)

MONETARY SECTOR
Broad Money M3
(ZWL$ '000)

Domestic Credit
(ZWL$ '000)

Credit to Private
Sector (ZWL$ '000)

Credit to Public
Parastatals (ZWL$
'000)

Credit to Government
( net )(ZWL$ '000)

Nominal Minimum
Lending Rate (%)

Nominal Maximum
Lending Rate (%)


PUBLIC FINANCES
Government Accounts
(ZWL$ m)
Revenue excluding
grants

Revenue including
grants

Capital expenditure
and net lending

Recurrent
Expenditure

Total expenditure and
net lending

Balance excluding
grants

Balance including
grants

POPULATION
(millions)


ANNEX 4: Financial Sector Indicators

Banking Sector
Capital Adequacy Ratio

Nonperforming Loans Ratio

Large Exposures to Capital

Return on Equity

Return on Assets

Prudential Liquidity Ratio

Capital Market
Market Capitalisation (ZW$)

All Share Index


REFERENCES
1. Financial Intelligence Unit. (2020). NATIONAL RISK ASSESSMENT. FIU.
2. International Monetary Fund. (2023). Global Financial Stability Report. IMF.
3. International Monetary Fund. (2023). World Ecoomic Outlook. IMF.
4. International Monetary Fund. (2024). Global Financial Stability Report.
5. International Monetary Fund. (2024). World Economic Outlook. IMF.
6. Jokipii, T. N. (2021). Exploring BIS credit-to-GDP gap critiques: the Swiss case. Swiss
Journal of Economics and Statistics.
7. Reserve Bank of Zimbabwe. (2023). Monetary Policy Statment. RBZ.
8. South African Reserve Bank. (2023, November). Financial Stability Review. Financial
Stability Review.