Credit Creation Challenges Faced by Zimbabwean Banks Since the Introduction of the Multicurrency System: Causes and Effects

Abstract

The purpose of the study was to establish credit creation challenges that commercial banks have faced since 2009 when the Zimbabwean government introduced the multi-currency system. The study employed the descriptive survey design. Both primary and secondary data sources were employed in the study. The study found out that commercial banks faced a myriad of challenges which included inability to attract long-term deposits, high levels of non-performing loans, low levels of capitalisation and high levels of political risk. The challenges in credit creation have caused the manufacturing sector to continue to be undercapitalized. The sector has therefore failed to fully recover from the economic downturn the economy experienced. The study is important in that it helps equip commercial banks with strategies that can be employed in their role of creating credit. This will help to finance the recovery of the economy which is underperforming because of challenges in the availability of debt financing.