Financial Intermediation and Fixed Capital Formation in Zimbabwe
https://doi.org/10.47703/ejebs.v67i4.278
Abstract
Business sustainability is heavily constrained by the shortage of affordable finance of adequate duration and quality. This affects producers and traders' capacity to reorganize their production and exchange systems to attain dynamic competitiveness. Ensuring sufficient and cost-effective high-quality finance in the nation facilitates financial intermediation. The traditional method of channelling and allocating financial resources in an economy has predominantly been carried out by the banking sector. Notably, the level of intermediation had been largely lower than the expected especially during the Covid-19 era implicating as serious problem of disintermediation. This study analyses the impact of financial intermediation on capital formation in Zimbabwe using Autoregressive Distributive Lag (ARDL) model from the first quarter of 2011 to the fourth quarter of 2020. The study finds that the financial intermediation process in the country remains largely weak to enable gross fixed capital formation which facilitates business sustainability. Financial disintermediation by banks is also reducing business sustainability. Several initiatives are suggested to alleviate financial restrictions within the country. One significant proposal involves enhancing competition in the banking sector by further liberalizing it. This is aimed at reducing the cost of credit, fostering financial innovation, and promoting increased credit circulation.
About the Authors
Upenyu SakarombeLloyd Badze
National University of Science and Technology, Bulawayo, Zimbabwe
Zimbabwe
Zimbabwe
Lecturer, Email: Ibadze@gmail.com
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For citations:
Sakarombe U., Badze L. Financial Intermediation and Fixed Capital Formation in Zimbabwe. Eurasian Journal of Economic and Business Studies. 2023;67(4):89–100. https://doi.org/10.47703/ejebs.v67i4.278
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