Development of the shadow banking system in Zimbabwe: A blessing from the Shadows?

Abstract

The rising of shadow banking institutions in Zimbabwe has been very quick for formal banking institutions and regulators to strategise against the threats that came with their development. This study applied qualitative data analysis and find that, the growth of a shadow banking system was market driven. Lack of confidence and financial innovation on the mainstream banking system to structure financial products that improve intermediation gave space for shadow banking growth. In response to this development, the researcher recommended that regulatory focus should be on the functions of shadow banks rather than institutions; this will be more inclusive and efficient in avoiding innovative creation of new entities that perform the same shadow banking functions. Also, the Zimbabwean formal banking system should be innovative in-line with the development of the international banking models.