The Role of the Financial Sector in Zimbabwe, Central Banking and its Social and Economic Impacts'

Abstract

The study seeks to provide a critique of the theoretical framework of economic governance as it relates to the financial sector in Zimbabwe and identify institutions in the financial sector and explain their roles. It also seeks to unpack the concepts related to the banking or the financial sector, with specific emphasis on the role of central banking from a policy and developmental perspective. Outline of the economic history of the development of the financial sector in Zimbabwe and the regulatory framework governing the financial sector will also be given. To capture the community's view and experience of the financial sector within the period 2003 to 2009, recording of community voices has been done, with main emphasis on the views around the  inclusion or exclusion, popular notions of monetary policy and banking, and impact (perceived or real) of these on people's social conditions. Finally the study seeks to equip the poor and grassroots communities and the working classes, to engage meaningfully in discussions on the role of monetary institutions as part of an ongoing engagement on economic and public policy advocacy.

Introduction

There has been increased call for a greater attention to the development of financial systems in many countries all over the world. The financial sector is well known for its purpose of allocating savings, from surplus units to deficit units. One can have plenty of resources (cash or wealth), but is not prepared to use or consume in the current period but later in the future. And on the other hand an economic agent may need funds for a specific purpose currently but due to some reasons have no adequate funds. So financial institutions help in collecting funds and match the current needs of some investors and hence creating economic development by avoiding idle funds. Some researchers (Herring and Santomero (1991)), argue that the direct impact of financial institutions on the real economy is minor, while the indirect impact of financial markets and institutions on economic performance is extraordinarily important.

A financial system which is efficient and healthy is a vital and necessary component for faster economic development. If a financial system is efficient, then it should show profitability improvements, increased funds intermediation, better prices for financial products and quality services for consumers. If the financial system is under tight regulation, financial markets would not be able to function efficiently and the use of resources would not provide desired outcomes. It should also be noted that reforms in other sectors have less impact on the overall economic development if the financial sector is under control, Edirisuriya (2007).

As part of the economic growth strategy, many economies have aimed at improving their financial sector. Ghana structured its financial reforms in two phases, FINSAP 1 and FINSAP 2 (Financial Sector Adjustment Program) and the reform for Non- bank financial institutions credit, Gordon (2008). An assessment of the impact of this policy on savings, investment and the growth of income (GDP) in the Ghanaian economy was undertaken by Gordon (2008) and positive impact of the financial sector on the economy. Previously, Ghana operated a tightly regulated financial system and the impacts of these policies on economic development were found to be dismal. The country turned to the International Monetary Fund (IMF) for assistance to reshape the macroeconomic structure, and one of the policy packages was to reform the economy's financial system. Financial liberalization thereafter affected positively the interest rate, savings, investment and GDP in Ghana. Sri Lanka also went ahead with its financial sector reforms about three decades ago, Piyadasa (2007). The reforms were also spearheaded by the IMF and World Bank, and they encouraged the opening up of financial markets for foreign and domestic competition and to encourage efficient functioning of financial market with less government interferences.  

Major economic factors to look at include; the inflation level, rate of economic growth, unemployment levels, balance of payments and the exchange rate (Business Studies Online). A well functioning financial sector is able to influence positively on the economic factors. High levels of inflation have a number of problems; people try to save money and so will spend less, high prices leading to people becoming worse off, costs will increase and exports will decrease hence exporting companies greatly affected leading to unemployment. The Zimbabwean nation has experienced such problems and do not wish to return to such time soon, savings have been eroded.

Capital goods production is one of the best ways an economy achieves a long lasting sustainable and stable economy. Financial services stimulate savings, investment and growth of GDP and for that matter economic growth by increasing the rate of capital accumulation and by improving the efficiency with which the economies use that capital, Gordon (2008). Well functioning banks spur on technological innovation by identifying and funding those entrepreneurs with the best chances of successfully implementing innovative products and production process.

The research seeks to explore the financial sector in Zimbabwe, its impact on the economy and how the Central bank policies affect the operations and efficiency levels in the economy. It dates back during the crisis period (2003-2009). The crisis originated from Central bank policies adopted during and before the crisis. The Reserve Bank of Zimbabwe (RBZ) adopted an uneconomic formula to control the level of money supply in the economy, and hence it failed to control the economy. The RBZ failed to control its independency status from the political family and hence supported uneconomic projects by printing excess money.

The relationship between the RBZ and other financial institutions during the crisis period can be explained y what the RBZ called ‘Financial Indiscipline' in 2008. It is reported that during the last quarter of 2008 the financial sector had fallen back into territories of indiscipline and general malaise,resulting in the contamination of ethics in such institutions as the Zimbabwe Stock Exchange (ZSE) which invented the deadly phenomena of "burning money". Indiscipline in banking and stock markets is precisely what has largely been responsible for the global economic crisis particularly in the USA, RBZ Monetary Policy (2009).

The RBZ Governor, was quoted in his Monetary Policy Statement, blaming the Financial sector and warning it against indiscipline in the market;

"As true as the sun rises and sets each day, the "miracle" of "burning" money could not be sustained by men and women born of flesh and pretending to have the supernatural powers of our Lord Jesus Christ. It was soon to back-fire and consume those who were stroking the fires in the first place."

The Governor argues that it is the activities of the Financial sector that transforms to the Central bank to be blamed, hence he has warned it several times, and has put measures to control their activities. The Governor specified that new measures constitute a war against idleness as without some gainful activity, citing roadport and world-bank sextillionaires destined for the starvation market. Hence from this evidence the RBZ has both social and economic influence on individuals and companies, and it is the impact of its influence that we seek to analyse. It was pointed out that individual and collective actions of the past have not taken the economy anywhere, particularly in the areas of advancing collective socio-economic programmes, hence RBZ initiated change of behavior, even from the politicians and diplomats. The RBZ set up a 5-year framework to guide the financial sector activities so that no shift from core banking business to speculative transactions.

Financial Institutions in Zimbabwe

Zimbabwe's financial sector is relatively sophisticated and consists of the Reserve Bank, discount houses, commercial banks, merchant banks, finance houses, building societies, the Post Office Savings Bank, numerous insurance companies and pension funds and a stock exchange. As at 25 January 2009 Zimbabwe has 15 commercial banks and 4 building societies under the supervision of the Reserve Bank of Zimbabwe.  

Commercial banks have been and are one of the most important contributors of private sector credit and therefore highly influential over most areas of economic activity. However, currently they are facing financial constraints, as the Reserve bank cannot perform its function as a lender of last resort due to the phasing out of the Zimbabwean local currency. Commercial banks have in fact changed their loan structure, they are now lending short term loans, just for their survival and to certain credible analysed economic agents. Short term loans are very costly as the interest is very high. They can't be used for sustainable investment, as capital investment needs to be matched with long term loans. Hence, various organisations are financially constrained, with several Small and Medium Enterprises (SMEs) shifting their operations, and the shift is not proper for the growth of the economy as it creates gaps in the economy. The banking sector has since facing problems; they have retrenched their workforce, as they have shut some operations due to the crisis.

The performance of the financial sector currently can be explained by the return on investment registered through the Zimbabwe Stock Exchange (ZSE) market. Very few companies registered on the stock exchange are making huge returns. The volatility of the Mining Index and Industrial Index is very low, indicating that it is not worth to invest in shares, as the return is almost to nothing. Also individuals are not able to generate savings to invest in the stock market, as many are earning very low salaries, far below the Poverty Datum Line. Workers are withdrawing all of their salaries in their bank accounts, leaving nothing for the banks to do their own investments. Banks are surviving on the bank charges and minimum balances for investing, making it hard to generate money for lending to the needy investors. Currently the economy is comprised of deficit agents who need to be rescued in the financial drought and very few surplus agents.

General Functions of Central Banking

A central bank is known as the apex of the banking structure. A central bank is distinguished from a normal commercial bank because it has a monopoly on creating the currency of that nation, which is loaned to the government in the form of legal tender. Central banks around the world have more or less the same roles they perform for the benefit of the economy, what differs is their efficiency and scale of operation. Most importantly is the level of central bank independency to political influence. Most of the rich countries today have independent central banks, that is, ones which operate under rules designed to prevent political interference. Examples include the European Central Bank  and the Federal Reserve System in the United States.

In a summary the general functions can be listed as follows;

1. Supervision of the entire banking system in the economy. (2) Should act as the government advisor on monetary policy. (3) Issue of banknotes and coins (printing money). (4) Acting as banker to other banks. (5) Acting as banker to government. (6) Raising money for the government. (7) Controlling the nation's currency reserves. (8) Acting as "lender of last resort." (9) Liaising with international bodies.

However it has to be noted that on each and every function, each country's Central bank has its own level of efficiency depending on the resources, rules governing operations, flexibility and many other factors. The Central bank of Zimbabwe commonly known as the Reserve bank of Zimbabwe (RBZ) also performs some of the above functions and has its own efficiency levels and hence affecting the transition of the economy's growth pattern.

Traditional functions and Developmental Functions of Central Banks

 It is also worthy to explain the several functions of the Central Banks in terms of origin and development perspective. For every Central bank, there are basic functions that it has to undertake for the public's benefit and also the economy in general. It is taken as the leader who should operate by example and should spearhead the path of which agents are to take. Hence the Central Bank has both Economic and Social influence.

Traditional Functions

Traditional functions refers to the obvious roles that the bank should be carrying. If the Central bank is not efficient in these roles, it can be quickly criticised by every economic agent. Inefficiency is quickly detected.

The functions can be given as follows;

1) Public confidentiality. (2) Uniformity in money issued. (3) Easiness in credit control (4) Control in value of money. (5) Economy (6) Elasticity (7) Stability (8) Easiness in monitoring and controlling

If the functions are well undertaken by the Central Bank, the economy is said to be stable and economic agents should be earning normal business profits, workers earning decent salaries, goods well priced and social status acceptable.

Developmental functions

Developmental functions refers to those functions that are strategic in nature and helps the overall economy to be competitive to other nations. They are associated with various economic policies that guide the entire nation on good business practices that enhance efficiency. The functions involves publication of economic data that can be used by various economic agents for their own analysis and economic forecasts, so as to determine the best ways of operation that is profitable and sustainable.

The functions can be listed as follows;

1) Economic development (2) Development of banking system (3) Contribution to the development of financial institution (4) Publication of economic data. (5) Supporting of loan to the poor sector (Empowerment) (6) Establishing the commercial banks in joint ventures (7) Development finance

If the Central Bank is not correctly partaking the functions, political influence comes into play, because they determine the efficiency of the ruling party. Also the efficient levels of the Central bank towards the developmental functions may be affected by the level of independency it has from the political world.

The Central Bank of Zimbabwe (RBZ) and its General Functions: Current Analysis

The efficiency and smooth running of many economies depends on the activities and functions of their Central banks, and from this phenomenon will make it necessary to analyse each basic function carried out by the Reserve bank of Zimbabwe.

The Central Bank is supposed to issue banknotes and coins

This function refers to the issue of printing paper money and is not as simple as it might seem. Only the central bank has the right to issue bank notes and coins in the economy and no one else. Printing of paper money and issuing of coins is highly depended on an economic formula of which if the formula is bypassed, it will change the path of economic development of the nation and hence causes inflationary effects. During the 2003-2009 period, the RBZ abuses its right of printing and issuing notes and coins and end up printing excess money and hence inflation increases exponential and the economy was unstable. It uses the wrong formula, of issuing the notes and coins. A correct economic formula matches the level of reserves to the amount of paper/ discretionary money in the economy. Due to the abuse of the role, the Zimbabwean dollar, lost its credibility in the economy, and turned into unwanted currency. Economic agents preferred stable currencies than the local currency, enforcement of laws was done to ensure continuous existence of the local currencies but could not work. Penalties were imposed, but still could not work as the RBZ continuously printed more money to finance government expenditure. ‘Good' money replaced ‘bad' money in the Zimbabwean economy. Until such a time when the local currency was completely rejected for any transaction, the authorities were forced to authorise the use of other currencies for business transactions (Multicurrency regime).

Most payment these days do not involve cash but cheques, standing order, direct debit, credit cards and so on, however cash is important as bank's cash holdings are a constraint on creation of credit. As of now the RBZ is no longer able to perform the function of issuing notes and coins, because the Zimbabwe has no currency right now. The economy is using South African rands and the United States dollar for business transactions. The amount of forex in the economy depends on the strength of attraction from the services the economy is rending to other nations, donors and credit from international organisations.

The Central Bank should act as "lender of last resort."

For the economy to be well function, organisations should be working at full capacity and with no constraints. One major constraints organisations face is the financial constraints. Companies usually obtain loans from banks and financial institutions, ranging from short term loans to long term loans (mortgages). However there is a time when banks are not able to meet demand and hence the Central bank has to be the lender of last resort. The government treasury bill and bond markets are covered by the central bank. It can offer in many types, there are 30 day treasury bills, 90 day treasury bills and 180 days treasury bills. One good thing with the Central bank loans is that they are cheaper as compared to commercial bank loans.

The RBZ currently is not able to act as the lender of last resort, there is no production of funds around its activities and neither can it print as there is no currency. The RBZ has lost its credibility, with the economy, other nations and development banks. In fact, it is struggling to pay its own debts, it has accrued during crisis period. Therefore, the bank cannot extend its hands to others rather is waiting for such favours.

Government advisor on monetary policy

Because, the Zimbabwean nation currently has no local currency of its own, the RBZ cannot fully advise the government on the central issue on monetary policy. The role implies that the RBZ would control the level of money supply in the economy to allow smooth business operations, and avoid inflationary effects. However, for the monetary policy statement is still issued in the economy, only to explain the happenings in the economy as far as interest rates are concerned. The monetary policy is no longer the road map which economic agents rely on, and it has lost its traditional importance.

Supervision of the entire banking system in the economy

The Central bank should be at the top of all other banks and hence regulating and monitoring the activities of the sector. The RBZ was in charge during the period, it was monitoring the minimum capital requirement levels. During the period some banks which were not performing according to the required level and not in line with the set regulatory framework were forced to close and some merged, for example the Time Bank was closed, Intermarket Bank was swallowed by ZB Bank family.

Social Roles of the Central Bank

During the crisis period the RBZ engages itself in various social programs, for example empowering citizens through the Mechanisation Programme. This was of great importance fro some individuals, although not all people were involved and the way it was done through excess printing of money. The program raises social RBZ from the perspective of the awarded population n the Agricultural sector. The RBZ also engaged itself in the housing financing schemes, giving food vouchers to the poor and sourcing cars and perks for court judges. However, there has been debate around the manner in which the bank has traversed its monetary policy duties to usurp the fiscal and other roles. The manner in which this institution has sought to control the mediated public sphere through mostly unorthodox means is said to have fuelled the crisis and has created social inequality as their policies were in quasi format and not able to cover the total population but rather the selected few.

Central Bank and Financial Institutions

The Central Bank is at the top of all financial institutions and of course it is the regulator of all the activities in the financial sector. However, the Central bank receives proposals from the various institutions on the activities that might need to be undertaken to improve the sector and profitability of the institutions. Apart from the Central bank's influential role, institutions have their own part to take. According to Posen (2006), central bankers cannot count on banking supervisors or budgetary officials to stick to the straight and narrow, even if one assumes that a politically independent central bank will pursue largely the right policy. Japan in the 1990s is a particularly salient illustration of the dangers of lack of coordination between financial and monetary authorities. Arguably, there was a three-way game of chicken between the Bank of Japan, the Ministry of Finance, and the new Financial Services Agency that paralyzed policy for the second half of the 1990s.

Central banks are not that powerful that financial institutions can be completely guided by unfavourable policies of the Central banks because of imperfect information and the speed at which researches are made by central banks and individual institutions. Researches by individual institutions are more efficient and faster than those by Central bank because Central banks broaden their research to cover the whole economy. So financial institutions should convince and prove their formulas to the central bank for approval and not only wait for policies by the Central banks. Innovation is the only way in which the financial sector relies on to reduce transaction costs.

Pressure applied by international organizations such as the IMF and the World Bank and the introduction of new technologies have forced authorities to relax controls making the financial sector more competitive and efficient in many countries (e.g Ghana and Sri Lanka) whose financial reforms have contributed to economic growth. Therefore for Zimbabwe financial institutions should continue to engage in technology invention despite tight policies from Central bank. Public awareness should also be done to increase the number of participants in the sector. Lack of financial literacy among the people and lack of clear directions from the government to the financial market affect progressing efficiencies further, Piyadasa (2007).

Effective communication can be an important and powerful part of the central bank's toolkit since it has the ability to move financial markets, to enhance the predictability of monetary policy decisions, and potentially to help achieve central banks' macroeconomic objectives, Blinder et al (2008). This means that if information is slow or incomplete between the Central bank and the whole financial system problems arise making it difficult to achieve economic goals. The inability to meet economic targets will affect the society as a whole both economically and socially.

A few decades ago, conventional wisdom in central banking circles held that monetary policymakers should say as little as possible, and say it cryptically, Blinder (2008). Communication policy has risen in stature from a nuisance to a key instrument in the central banker's toolkit. As a result, many central banks have become remarkably more transparent and have started placing much greater weight on their communications. The Reserve Bank of Zimbabwe, has been communicating through presentation of monetary policy, magazines and newsletters and newspapers among other methods in an effort to give information to the financial systems on its policies. However, it is the quality of the information that also matters and implications associated.

Official statements, reports, and minutes appear to have the clearest and most consistent empirical effects on financial markets. The evidence on the impact of speeches is more mixed. But it, too, is mainly supportive of the idea that central bank communication "creates news." Communication can be divided into "short-run" central bank communication and "long-run" central bank communication depending on the scope and time horizon objectives.

it is widely accepted that the ability of a central bank to affect the economy depends critically on its ability to influence market expectations about the future path of overnight interest rates, and not merely on their current level.

The Reserve Bank of Zimbabwe indicated specifically the guidelines to be followed by the banking sector, of which violation was financial indiscipline. This was to ensure uniformity in the sector, so as to manage the crisis. It also shows that the banking sector is well controlled and monitored by the RBZ.

 Diagram.

Source: Reserve Bank of Zimbabwe, Monetary Policy Statement, January 2009

Whilst it is a good idea that the Central bank controls and monitors the development in the financial/banking sector, it is also worth for it to adjust and revise its rules and regulations in the earliest time that allows flexibility and innovation in the sector. The RBZ policies are in place for a long time, such strategies are not suitable for a developing and high innovative economy like Zimbabwe. The Zimbabwean financial/banking sector is trying to race with other nations to book a competitive level in the international market. With increasing globalisation there is increased linkages among nations as there are now increased numbers of travellers, the banking sector should be faced by both exogenous and endogenous policy guides.

Regulatory Framework for Non-bank Financial Institutions

The relationship between the RBZ and Non-Bank financial institutions is one sided as the former is not satisfied by the freedom they enjoy. According to the RBZ there is an absence of a well defined and comprehensive regulatory prudential supervision framework for the Zimbabwe Stock Exchange, Stock Brokers, Insurance Companies and Pension Funds and this has significantly compromised financial stability. Illegal transactions, indiscipline and reckless disregard of rules and regulations have been detected in the sector. There are no prescribed educational credentials for registration of stockbrokers. During the period under study most pension funds and insurance companies were not complying with the minimum prescribed asset requirements of 35% and 30%, respectively.  Hence the RBZ was calling for compliance.

The minimum capital requirement  for various institutions were set as follows;

 Diagram.

Source: Reserve Bank of Zimbabwe, Monetary Policy Statement, January 2009

While it was good to have these minimum capital requirements, many companies failed to comply and this automatically indicate that the levels set were quite too high for the period. Any reforms based on such set targets are deemed inappropriate and likely not ensuring stability. The Central bank has to consult various organisations to reach an economic minimum capital requirements, this ensures the smooth operations among institutions. The RBZ should welcome suggestions from the public and various economic agents apart from its research and monitoring management tool kit.

Recorded Community Voices Capturing experiences with the Financial/Banking Sector during 2003-2009 in Zimbabwe:

"From long, I have developed trust with the banks, and every extra money I channelled it into my CBZ account. And there it was kept safely, and for me it was a good spending discipline as I was not always in town to withdraw cash. I only went there, after my money has accumulated and need to buy a good asset with value. However, as time goes on, saving money could not bring development to me as the amount remains insignificant over time, including the interest which was almost nothing. Late, as years progress, cues were now seen at banks, it became harder and harder to withdraw cash, then it became harder to deposit cash as the return was zero. As inflation increases, public cues increases during month end, so as to withdraw cash quickly before inflation does its job of value reduction."

"The crisis made me poorer, all my money in the bank which I saved for years was reduced to nothing."

"Companies were now paying people twice a month, money has lost its value."

"It was profitable to invest in the shares, as the price was shooting day by day, but the economy was not growing."

"The banks, became the source of corruption. To withdraw money, you have to know somebody or you cue for the whole day."

"During the crisis period my bank could not meet the minimum capital requirement set by the RBZ and hence it merged, leading to the change in name."

"I survived through hedging, as keeping money in the bank proved to be disinvestment. As soon as my pay is in the bank account, I withdraw the money and buy foreign currency, which i will ration through the month. Signs of danger in the economy could be slowly de detected until it becomes common knowledge to go for forex to store value of the money."

"It started with schools asking for top up fees every term. I thought schools are now robbing us, yet there was no increase in the services they offered to our children. Then, my money later proves not to be enough for me and my family but I have a good job and status."

"Taking money from the banks was very hard, however I used ATM card to buy groceries in supermarkets and it was good then. Later, ATM cards were rejected by supermarkets and it was hard time now."

"Banks were now useless, barter trade was far better to operate with."

"The returns on the ZSE were too high, and did not reflect development levels in the economy. But I wasn't tempted to sell my shares."

"Minimum withdrawals were put in place, and I decided to open many bank accounts with several banks, so that at the end of the day I will have money to exchange with forex which was a better store of value."

Conclusion

The Zimbabwe financial sector, although it is currently underpinned by various constraints, it remains one of the best organised sectors in the economy, and strives to improve economic performance. The sector greatly needs the support from the government, implying that means the government should come up with policies that do not interfere with the innovations in the sector. The sector is always the pioneer in innovation and development. The Zimbabwe Stock Market is the second best in Africa after the Johannesburg Stock Market, and this shows that constant support and development of the sector should be done to keep and improve our position. As part of development of the sector, derivative markets can be reintroduced in Zimbabwe, as they improve society relationship and improve risk management for investors. Derivatives improve production through certainty of prices, and through the use of futures and contracts.

As the banking sector is the leading sector in most financial systems, the reforms should be mainly directed towards the banking sector. Most of these reforms in the past were mainly advocated by the IMF and the World Bank. To improve the banking sector there are some recommendations worth to be taken care of to ensure efficiency and involve improving private sector participation in the financial sector, removal of restrictions on banking products such as interest rate and loans, exchange rate relaxation, opening up of financial markets for foreign and domestic competition and to encourage efficient functioning of financial market with less government interferences. If banks remain weaker, then they will continue to depend on public support, Petra (2010).

The research found out that financial services stimulate savings, investment and growth of national income (GDP) and for that matter economic growth by increasing the rate of capital accumulation and by improving the efficiency with which the economies use that capital. Schumpeter (1912) contends that well- functioning banks spur on technological innovation by identifying and funding those entrepreneurs with the best chances of successfully implementing innovative products and production process. Foreign banks should be allowed to compete with state owned and private sector financial institutions in varying degrees.

Financial reforms should mainly be directed towards relaxing the regulatory measures and reducing state's grip on the system.  It should be noted that developed markets are easily able to adjust to new reforms whilst it is not so easy in emerging market countries. There is a possibility that some temporary economic destabilizations may occur at the beginning of certain reforms. Study on seven countries conducted by the IMF to examine linkages between financial sector reforms and financial crisis has identified a number of destabilization factors (Sundararajan and Balino, 1991). Hence developing nations should not quickly reverse a policy when destabilization occurs because policy makers lose credibility yet their policy may be sustainable in future. Higher level of social rigidities is one of the dominant factors significantly affecting the financial markets and this slows down the benefit of financial reforms.

Poorly designed or poorly executed communications clearly can do more harm than good; and it is not obvious that a central bank is always better off by saying more. In practice, central banks do limit their communications. In most cases, internal deliberations are kept secret. Only a few central banks project the future path of their policy rate. Communication is not pre-commitment, that is communication should not be confused to commitment, a public announcement requirement could impede timely and appropriate adjustments to policy.

Central bank communication is also a two-way street: It must have both a transmitter and a receiver, and either could be the source of uncertainty or confusion. Moreover, on the receiving end, the same message might be interpreted differently by different listeners who may have different expectations or believe in different models.

In conclusion, policies to improve the financial sector should be socially acceptable and socially related. There should be a designed way that links the Central Bank policies and the public view, so that any strong disparity should be justified. For every policy, target population should be seen benefiting from the policy, because it has been argued that, different economic agents are benefiting more than the defined target.

As it has to been noticed by various individuals' testimonies, the period in which the financial sector is in disorder gives people a very hard time because of its direct impact to the economy. Hence it is advised that the authorities should design policies that are in line with the financial sector development and hence it is socially acceptable. Economic development is directly connected to financial development, although some proposed a two way causal effect of the two. Zimbabwe's financial /banking sector contributes to the level of economic growth, hence should receive adequate support.

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