Financial Resource

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.

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.

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.

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.

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.

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

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