[2008-05-30]  Informal forex traders shun banks
THE requirement to fill in forms before selling foreign currency to registered financial instituions is scaring away sellers, economic analysts have said.
In a commentary, Kingdom Stock Brokers said most traders on the informal market were not comfortable with providing personal details which they felt could be used to trace them and preferred to deal on the parallel market where there was no paperwork. and which offered anonymity.
“Some people are just not comfortable filling in forms like is the case when one goes to the bank to sell foreign currency. The details required on the forms, like name and address, just do not augur well with some foreign currency dealers who feel safe remaining on the parallel market where such details are not required,” said an analyst with KSB.
He said the parallel market was still thriving despite measures by the central bank to allow registered financial institutions to buy foreign currency on a willing-buyer willing-seller basis using agreed rates.
One month since the Reserve Bank of Zimbabwe Governor, Dr Gideon Gono, liberalised the foreign currency market to allow market forces to peg the rate of foreign exchange, analysts said many people were still trading on the parallel market, which continued to offer better rates than the formal market.
The move by the Reserve Bank to allow market forces to determine the exchange rate was hailed by most sectors of the economy who felt the old controlled exchange rate was stifling exports.
However, the analyst said foreign currency inflows through banks were still inadequate, forcing companies which are supposed to buy hard currency from banks and other authorised money transfer agencies to go back to the parallel market.
The analysts said most informal dealers were disposing of their foreign currency on the parallel market where rates remained attractive compared to those offered by financial institutions.
When the new system was introduced, rates on the parallel market trailed those in banks, resulting in many people selling their foreign currency through the official channel. However, the parallel market rates have since overtaken those offered by banks.
The rigid banking hours maintained by most financial institutions also played a part in reducing inflows to the formal sector. Most banks open at 8 am and close at 3pm, giving people seven hours to conduct transactions, whereas parallel market dealers operate 24 hours a day.



Source: (C)2008 THE CHRONICLE