This document is a research project by Aleck Makandwa that evaluates the impact of the liquidity crisis on commercial banks in Zimbabwe, focusing on the ZB Bank Mashava branch. It explores how insufficient cash reserves lead to loss of investor confidence and discusses factors contributing to the liquidity crisis, including excessive imports and inadequate governance. The study aims to understand and propose solutions to mitigate the effects of the liquidity crisis on banking operations in Zimbabwe.

1. GREAT ZIMBABWE UNIVERSITY
FACULTY OF COMMERCE
DEPARTMENT OF BANKING AND FINANCE
EVALUATING THE IMPACT OF LIQUIDITY CRISIS TO COMMERCIAL BANKS
IN ZIMBABWE (A CASE STUDY OF ZB BANK MASHAVA BRANCH)
BY
ALECK MAKANDWA
REG NUMBER: M154434
LECTURER: MR DIZA
This research project was conducted by Aleck Makandwa, studying Banking and Finance at
Great Zimbawe University, as an assignment and general practise in the Course of Research
Methods in Banking, therefore many subtopics are left out because of limited time, funds and
sources for consultation during the study
October 2016
Masvingo, Zimbabwe

2. ACKNOWLEDGEMENTS
I would like to register my heartfelt appreciation for the guidance and utmost support from
my parents Mr R and Mrs F Makandwa, my brother G Makandwa and the family.
My sincere gratitude also goes to Talent Hove, Coghlan Dube and all my Banking and
Finance colleagues for their assistance

3. ABSTRACT
Zimbabwe Commercial Banks experience an investor confidence loss during liquidity crises,
making it difficult to raise further cash. If a bank has insufficient cash reserves, it could run
into a vicious circle, where the bank cannot pay its debts because it has no funds, as well as, it
cannot raise funds because its financial difficulties result in its debt´s downgrading. The
paper´s aim is to contribute to the debate on the impact of liquidity crisis in the banking
system. Due to the theoretical character of the problem, the used methodology is a set of
results from research and theoretical works about how the attempts to increase system
solvency could lead into a greater lack of liquidity system. The investigation of the effect of
liquidity crisis is one of the basic viewpoints for banks in Zimbabwe to manage and contend
in the business. The intendment of this exploration work is to audit and investigate the degree
to which banks have been influenced by the 2016 liquidity emergency in Zimbabwe. It is
likewise an order of this exploration to discover if liquidity emergency really impacts the
execution of banks over the study timeframe. In synopsis, Chapter 1 weights on the
presentation, it similarly manages the foundation of study proclamation of issues, research
inquiries, criticalness and speculation to test. In chapter 2, the writing audit was highlighted.
Also in Chapter 3 manages the exploration plan, essential and auxiliary information and
Chapter 4, focused on the presentation of information and examination lastly Chapter 5
complement the condition with the above methodology.

4. TABLE OF CONTENTS
Title page
CHAPTER ONE…………………………………………………………………………1
1.0 INTRODUCTION.......................................................................................................1
1.1 Background of the study…………………………………………………………..1
1.2 Statement of Problems…………………………………………………………….2
1.3 Objective of the study…………………………………………………………......2
1.4 Statement of Hypothesis…………………………………………………………..2
1.5 Significance of the Study………………………………………………………….3
1.6 Limitation of the Study……………………………………………………………3
1.7 Research questions………………………………………………………………...3
1.8 Definition of terms………………………………………………………………...3
CHAPTER TWO………………………………………………………………………. 4
2.0 REVIEW OF LITERATURE……………………………………………………….4
2.1 Introduction………………………………………………………………………..4
2.2 Taxonomy of literature review……………………….............................................5
2.3 The History and causes of liquidity crisis in Zimbabwe…………………………..5
2.4 Impact of liquidity crisis to ZB Bank Mashava Branch…………………………...5
2.5 Relevant models or issues to Liquidity crisis……………………………………...6
2.6 Summary of the chapter…………………………………………………………...7
2.7 References…………………………………………………………………………7
CHAPTER THREE………………………………………………………………………8
3.0 RESEARCH METHODOLOGY……………………………………………………8
3.1 Introduction…………………………………………………………………………9
3.2 Research design …………………………………………………………………….9
3.3 Population of the study………………………………………………………...…...10
3.4 Area of study/coverage ………………………………………………………..…...10
3.5 Sources of data ……………………………………………………………………..11
3.6 Method and techniques of data……………………………………………………..11
3.7 Decision Rule……………………………………………………………………….12
CHAPTER FOUR………………………………………………………………………...12
4.0 PRESENTATION AND ANALYSIS OF DATA…………………………………..12.
4.1 Data presentation…………………………………………………………………….12
4.2 Data analysis and interpretation……………………………………………………..13

5. CHAPTER FIVE……………………………………………………………………………13
5.0 DISCUSSION OF FINDINGS CONCLUSION AND RECOMMENDATIONS…...13
5.1 Summary ……………………………………………………………………………….13
5.2 Conclusion………………………………………………...……………………………14
5.3 Recommendations………………………………………………………………………14
5.4 Suggestion for further readings…………………………………………………………15
Bibliography……………………………………………………………………………15

6. CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF STUDY
THE Zimbabwean economy is currently experiencing a liquidity crisis which has
been a problem for quite some time. Banks feel the effects of the liquidity squeeze
directly while other productive sectors in the economy perceive it indirectly. There
are questions that arise because of the liquidity crunch. What is liquidity? What are
the causes of the liquidity crunch in Zimbabwe? What are the main effects of the
liquidity crisis? How can the effects of the liquidity crunch be alleviated?
The execution of Zimbabwe Banking part was occupied into desperate condition by
the nation's present liquidity crisis position. The crisis which began around December
2015 off drove the Banking business to slide into profundity of traumatic entrail of
retreat which diminishes Bank customer's certainty. With lessening funds, it is
troublesome for a bank to take care of day by day money demand from contributors
and to satisfy the requirements of its customers. Makoshori (2016) conceptualize that
investors escape from banks and wander into casual funds bunches or informal
savings groups, known as Mukando or MaGroup because of a disintegration of trust
in the managing an account industry, lines and day by day normal withdrawal confine.
This exploration concentrate additionally unearths the present elements of Banking
Industry as takes after:
• The greatest withdrawal confine in the bank every day is $300 every day
• The Minimum is $20 every day
• The normal withdrawal breaking point is $100 every day
• Depositors are making every day withdrawals and were charged $5 per
exchange before the RBZ looked into monetary charges. Presently it is $2.50.
• RTGS pulled in a charge of $10 per exchange before the RBZ decreased it
relying upon the estimation of the exchange.
• RTGS to outside records have been confined
• Internal RTGS are constrained.

7. • Some banks regularly come up short on money
• Bank lines are the request of the day
• Premiums of between 10-25% are presently charged for money at the parallel
market which is raising its monstrous head once more.
• There is frenzy available with separated deficiencies of fuel and some
fundamental products, for example, sugar and cooking oil. Indeed strange fuel lines
are framing at some administration stations.
• People and organizations are defaulting on instalment commitments and
suppliers no more give credit terms. This will encourage harm banks' advance books.
1.2 PROBLEM STATEMENT
The liquidity crisis which offers ascend to the disappointment of numerous banks has brought
the respectability of the saving money division to a steady core interest. The emergency has
suggested respectability conversation starter as well as has enormously lessened the certainty,
which is the best resource of the bank. The researcher plans to think about and look at the
effect of trade emergency out Zimbabwe Financial framework and to make proper proposal
for ideal execution.
The reason is not only one of the truths that a few banks are battling however there are
different issues connected with them that the analyst tries to address, these issues include
- the loss of public trust in the managing an account industry because of the emergency in the
segment (Aleck 2000).
- How the liquidity emergency added to banks predicament.
There are various issues that have emerged and which constitute emergency in the keeping
money industry of Zimbabwe and this work will endeavour to settle them.
1.3 OBJECTIVE OF THE STUDY
The target of this study is to make some sensibly examinations and, then discover a few
realities paltering to the rate of Liquidity emergency and its level of presence in Zimbabwe.
Henceforth, the exploration work will go similarly as following the foundation of the issue,
continually expanding the rate of liquidity crisis.
(a) To decide the impact of liquidity crisis on banks of Zimbabwe
(b) To discover the endeavours and contributions of over a wide span of time legislature of
Zimbabwe leased to tackle the issue of liquidity crisis
(c) To uncover the react of banks and its customers to liquidity emergency problem
(d) To look at the factual use of the study, that will upgrade the observational discoveries of
the impacts of Liquidity emergency to banks.
(e) To decide a reasonable arrangement toward changing and reducing the issue of Liquidity
emergency to Banks in Zimbabwe.

8. 1.4 STATEMENT OF HYPOTHESIS
This segment would outline some speculation of this examination project.
Ho: there is no critical relationship between liquidity crisis and benefit, stores and credits of
Banks in Zimbabwe.
Hi: Liquidity crisis has an impact on the benefit and operation of Banks in Zimbabwe.
Where Ho: Null hypothesis.
Hi: Alternative Hypothesis
1.5 SIGNIFICANCE OF THE STUDY
The researcher would like to accomplish a great thing toward the end of the study. This
research will help many that are keen on the Banking industry, it will likewise help them to
do the reasons for crisis, and how it can be an immense advantage to the following
individuals.
1. Students in the field of Banking and Finance
2. Bank: It is of awesome advantage to banks when they see that Liquidity crisis is a danger
to its operation so it can discover strategies to alleviate the money crisis. 3.
Future Researchers: It will serve as a buddy to future analysts who are intrigued on the effect
of liquidity emergency to business banks and conceivable remedies.
4. Investor. It will assist them to know the impact of Liquidity emergency with banking by so
doing they will be mindful so as not to put resources into banks if there is money crisis.
5. It will likewise edify to the public on how liquidity crisis has cause a considerable number
of problems in our economy.
1.6 LIMITATION OF THE STUDY
In leading research work of this nature, certain limitations will undoubtedly influence the
study. These incorporate the accompanying: cash, time and effort.
Money being a rare item, an understudy won't have enough cash excessively get together the
each of the three monetary commitments by making a trip to numerous association which is a
pre-essential for an exploration extend. As an aftereffect of this imperfection, this study will
focus on the effect of liquidity crisis on the execution of store of business banks in Zimbabwe
with reference to ZB bank Mashava Branch.
A research of this nature cannot be refined inside a brief timeframe. It requires time on the off
chance that one really needs to compose thoroughly on the topic.
Also a few representatives of the bank where different inquiries were asked declined
enthusiasm as an endeavour to convince them because of their own timetable being a
constraint to this project.

9. 1.7 DEFINITION OF TERMS
LIQUIDITY CRISIS: is a deficiency of money and other promptly accessible assets to
address monetary issues.
INFORMAL SAVING GROUPS (MUKANDO OR MAGROUP): a social association
framed to help group individuals spare cash for particular purposes (either individual or
group level).
BANK: is a financial organization authorized to get deposits and make credits. Banks may
likewise give monetary administrations, for example, wealth administration, cash trade and
safe deposit boxes.
RTGS: are pro supports exchange frameworks where the exchange of cash or securities with
one bank then onto the next on a "constant" and on a "gross" premise
DEPOSITOR: any individual who keeps cash in a bank balance.
INVESTOR: any individual who dispenses capital with the desire of a future monetary
return.
HYPOTHESIS: is a supposition or proposed clarification made on the premise of constrained
proof as a beginning stage for further examination.
LENDING RATE: this is a rate at which Banks make progress to their clients.
CHAPTER TWO
LITERATURE REVIEW
2.1 Introduction
In the previous chapter, the scene for the research was set. This chapter examines available
relevant literature by earlier researchers on the effect of liquidity crisis in the Banking Sector.
According to Sharp et al (2002) two major reasons for reviewing the literature are that the
preliminary search helps to generate and refine research ideas and it demonstrates good
knowledge of research area. The benefits include assisting the reader to understand more
about the problem and to make research with other research studies.

10. A lot has been written about the liquidity crisis in Zimbabwe with different approaches on the
subject. This chapter will give an insight into empirical research and theoretical information
2.2 Taxonomy of literature review
Educational Resources Information Center (1982) defines a literature review as an
“information analysis and synthesis, focusing on findings and not simply bibliographic
citations, summarizing the substance of the literature and drawing conclusions from it”
.According to Cooper (1988) literature review can be classified according to types of
literature review focus, goal, perspective, coverage, organization, and audience. The first
characteristic is the focus of the review. Cooper (1988) identifies four potential foci: research
outcomes, research methods, theories, or practices or applications. Literature reviews that
focus on research outcomes are perhaps the most common. pertaining the causes, effects,
history of liquidity crisis and recommendations to cushion the problem.
2.3 History and Causes of Liquidity crisis in Zimbabwe
The Zimbabwe financial system which is in the valley of death currently since the 2008 and
2009 hyperinflation pose pressure to Commercial Banks since depositors’ daily withdrawal
increases due to increase in cash crisis in the country. Researchers such as Mpofu, and
Marwei (2015) states that “ Zimbabwe’s financial system was better yesterday than to date,
the introduction of Multi-currency system was at first a yield and central option since the
general public, investors and many commerce participants were afraid about the return of the
Zim-dollar, However this adopted system limited the Zimbabwe government to reproduce the
adopted currency in form of Seigniorage since the Reserve Bank of Zimbabwe (RBZ) do not
have the right to print the currency. This means therefore that all the money which might be
lost during circulation eg radiated money, lost money etc cannot be easily recovered without
foreign trade. Gowans(2016) highlighted that Zimbabwe’s fragile economic situation is
lurching towards fresh depths amid indications that small United States dollar denominations
are disappearing from circulation, thereby raising the possibility of a change crisis. The
development has triggered speculation of a conspiracy to mop up the small denomination US
dollar notes to pave way for the planned introduction of bond notes of similar denominations
by the Reserve Bank of Zimbabwe (RBZ) at the end of next month.
Despite widespread resistance against the proposed introduction of bond notes, government is
proceeding with the introduction of the domestic currency which, it insists, is a surrogate of
the US dollar -- the major currency under Zimbabwe's multiple currency regime. Currently
many financial institutions such as Microfinance institutions, Banks, Ecocashs, Mukuru,
Western Union and many more are struggling to “healthy” in the economy of Zimbabwe.
Guvamatanga(2016) conceptualize that Zimbabwe Liquidity crisis is primarily caused by
excessive spending on imports therefore creating unsustainable economic environment.
According to data released by Zimbabwe National Statistics Agency (ZNSU) shows that
Zimbabwe posted a $3 billion trade deficit from January to November 2015. Trade figures
showed that exports amounted to $2.5 billion against $5.5 billion in imports, indicating the

11. country’s continued reliance on foreign goods as the local industry remains depressed.
Speaking at ZB bank annual General Meeting, Mr Mukore said the decline in local
production has resulted in Zimbabwe depending on imports, “Spending on imports is causing
the cash crisis. We are just a nation consuming more than what we are producing hence
controls are needed to mitigate the crisis and ease pressure on Banking sector, also we are
using the money which is not ours, there is an anomaly, the previous $3500 maximum cash
withdrawal is something as a country cannot sustain and that limit was for other people
taking money out of the country, making the control system necessary.”.
Zvareva (2015) also posits that ZIMBABWE’S unsustainable trade or current account
deficit, poor balance-of-payment position as well as massive revenue leakages, corruption
and an uneven distribution of liquidity in the market are the major reasons behind the
prevailing serious cash shortages buffeting the economy. Apart from that, James (2014)
outlines that another contributing cause to the current liquidity crisis in Zimbabwe is the
economic policy of Zimbabwe, the indigenisation policy, which hinders Foreign Direct
Investment (FDI) which emerge countries and promotes HOT MONEY that is the flow of
cash from one country to another through investment. Mashakada (2016) also underline that
Public Borrowing also cause liquidity crisis in Zimbabwe. Government has been issuing
Treasury Bills amounting to $2 billion dollars. The problem is that all the TBs were rolled
over upon maturity. This seriously affected banks’ cash flows. In fact some banks were
driven to the brink of collapse by the purchase of TBs. He further argued that Poor revenue
performance also contributed to the current cash crisis in Zimbabwe. This is so because
ZIMRA revenue collections are dwindling every month because companies are closing.
Growth is plummeting and there is a general slump in production. The economy has negative
Savings.
Ian Ndlovu (2016) a lecturer at National University of Science and Technology also point out
that liquidity problems have been worsened by the systemic risk and weak corporate
governance structures and systems in the banking sector which have led to the collapse of a
number of banks in the 2000s, that is, from 2002 to 2013. Most potential depositors just like
any economic agent use past experience or history to make future decisions. According to
conservative estimates more than $1 billion is circulating outside formal banking channels
implying that the informal sector which employs many so-called unemployed is actually
more liquid than the formal sector. There is visual evidence which attests to the fact that the
informal sector is very liquid.
2.4 Impact of Liquidity crisis to Banks ( ZB Bank Mashava Branch)
During an interview with Daniel Chimenyi (A ZB Bank Mashava front office desk
representative) he conceptualise that, “the international financial system is designed in a way
that Tier1 and Tier2 banks which are mainly your foreign-owned banks, benefit from the
export receipts. In other words, export earnings favour stronger financial intermediaries
meaning that POSB, ZB Bank and AgriBank do not benefit much and this would obviously
affect their liquidity situation.” He also further on argued that the main target of ZB Bank in
Mashava is the Great Zimbabwe University students however the market is deteriorating to

12. fade because students are now preferring other form of transaction when buying goods and
meals such as the use of merchant codes, direct mobile cash transfer, informal saving groups
etc because the Bank do not have enough cash to settle the demand. Moreover, in an
encounter with part 2:2 students studying Banking and Finance on Wednesday 12 October,
many promontory points has been raised concerning the ZB Bank in Mashava. They have
postulated that it is difficult nowadays for us as students to deal with banks because they do
not provide cash on demand. Also they provide millipede daily services which result in
queues and chaos therefore it is wise for us to choose other forms of cash keeping which are
liquid rather than Banks.
It is beyond any reasonable doubt that Zimbabwean citizens are now venturing into small
saving groups called Mukanda or Magroup where individuals help each other to raise funds
for a certain commodities where everyone is a banker to another, these saving groups were
created to reduce burden and disappointments from the millipede services offered by the
Banks since they provide daily minimum requirement which is not favourable. Banks
introduced this system in order to cater a prolific rise of cash demand by the depositors since
their confidence is deteriorating to fade every second passing by.
2.4 Relevant models or Issues to do with the Liquidity Crisis.
Much of the current crisis can be traced to models that failed to adequately reflect risk, both
in adopted Multicurrency system, introducing Bond coins and complex financial instruments.
Even if historical financial system data had never recorded changes like those realized
recently, data from other bubbles, from tulip bulbs on, could have been used. It was not clear
that financial system was in a bubble, but bubble scenarios should have been in the models.
Those model issues need to be, and are being, addressed, but here the focus is on liquidity
Crisis of Zimbabwe. Regardless of the underlying causes, liquidity problems can be
magnified by market price disruptions, and these effects should be included in risk models.
Such modelling needs to postulate a mechanism. Morris and Shin (2004) model “liquidity
black holes” as arising from price movements and common trading strategies of short-term
investors: “liquidity black holes have the feature that they seem to gather momentum from
the endogenous responses of the market participants themselves. Rather like a tropical storm,
they appear to gather more energy as they develop. Part of the explanation for the
endogenous feedback mechanism lies in the idea that the incentives facing traders undergo
changes when prices change. Market distress can feed on itself. When asset prices fall, some
traders may get close to their loss limits and are induced to sell. But this selling pressure sets
off further downward pressure on asset prices, which induces a further round of selling, and
so on. Portfolio insurance based on dynamic hedging rules is perhaps the best known
example of such feedback.”
Modeling liquidity risk can start with stress tests. The current market is one example of a
stress scenario. A convergence of adverse asset, liability and credit availability situations can
be postulated and the cash flows projected along with the value changes. Probabilistic

13. scenario generation requires assigning probabilities to the stress scenarios and including them
in a larger simulation. Having a model that predicts occasional market dislocations, such as
Morris and Shin’s, can help incorporate liquidity events in the scenarios. Certainly there is an
interaction between price movements and liquidity movements that can be taken into account.
Such modeling can quantify the impact of liquidity risk on capital adequacy. Part of the
problem is recognizing off-balance-sheet cash needs that can arise in a market disruption,
such as collateral requirements, embedded options, refunds due to ratings down-grades, etc.
This also emphasizes the utility of dynamic ERM models— models that include response
strategies to various events. Dynamic ERM models can also benefit from the framework of
timeline simulation, where events are simulated in order of occurrence and time stamped (see
Kreps, 2009). What is now important in models is to have scenarios and responses take into
account the possibility that other players are following the same strategies; liquid assets may
become illiquid; off-balance-sheet commitments might be triggered, etc. Models for these
possibilities and the interaction of price and liquidity are appearing in published theory, but
nailing down reasonable probabilities for liquidity and corresponding pricing events could be
an area of research for some time to come.
2.5 Summary of the chapter
This chapter discussed what previous researches proposed and propounded on the study area
of the liquidity crisis in Banking sector of Zimbabwe. Key areas of improvement in the bank
and the possible reasons were identified. The literature revealed the various models to do
with liquidity crisis. (Heggde and Panikar, 2011).Various Liquidity models and strategies
were discussed leading to the crafting of the theoretic framework which guides the research
study. The majority of the research is based mainly on the impact of the crisis to ZB BANK
representing other banks in the Banking industry. This research will help in creating tailor
made turnaround strategies in the commercial banks from a Zimbabwean perspective. The
next chapter will concentrate on the research methodology backed up by academic ancestors
on research methods, and discussion on how the data and information is gathered and the
relevant justifications given
REFERENCES
Guvamatanga, G (2016) The impact of Liquidity crisis to the Economy of Zimbabwe.
Midlands State University, Gweru.
Gowans J (2016) An Introduction to cash crisis in Zimbabwe. McGraw Hill, New York.
James, O (2015) Contributions to Zimbabwe Liquidity Emergence in 2016. Kingston Printers,
Pretoria.
Mashakada,V (2016) Causes of Liquidity Crisis in Zimbabwe. Mambo Express, Harare

14. Mpofu, F and Marwei, L (2015) Zimbabwe’s economic situation during and after the
hyperinflation. Longman, Harare.
Mukore,S (2016) Effects of Multi-Currency system to Indigenous Banks in Zimbabwe, A Case
study of ZB Bank. Mambo Express, Harare.
Ndlovu, I (2016) Problems of Liquidity crisis to the economy of Zimbabwe, National
University of Science and Technology, Bulawayo.
Zvareva, K (2014) Primary Causes of Cash Crisis in Zimbabwe. Longman, Harare.
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Introduction
This chapter provides an insight into the methodology adopted in the collection, analysis and
interpretation of the data for the study. It attempts to provide a detailed analysis of the
research plan and tools utilized in the actualization of this study. It will also give details of
the research population and sample. Data collection methods used in the study as well as the
techniques employed in collecting each type of data will be outlined. The chapter will also
focus on the data validation, evaluation of the reliability of the data and a data presentation
and analysis plan
3.2 Research Design.
The descriptive survey method has been adopted for the purpose of this study. This type of
research design was chosen as it enables the assessment and analysis of certain behaviour and
information. The primary objective of the study is to evaluate the impact of Liquidity crisis to
commercial banks in ZImbabwe. Therefore, the adoption of this survey method is important
to ensure a detailed account of the factors contributing to financial chaos liquidity crisis in the
country. Although this method takes a lot of time, frequently cost and depends a great deal on
the willingness, honest and ability of the respondents. With a descriptive research design the
researcher cold reveal data and perform analysis and assessment that often lie on the blind

15. side of liquidity crisis formulation. The research design was also chosen as it aids enhancing
a deeper understanding of phenomena and deemed to produce a strong descriptive result.
3.3 Research Population
The study population is made up of the Reserve Bank of Zimbabwe (RBZ) which is the one
responsible for making monetary and fiscal policy decisions. It also includes commercial
banks which are affected with the Policies implemented on their activities. The respondents
include the head regulatory and supervision department, ZB bank Mashava Branch workers,
Great Zimbabwe Univesity Mashava Students and Lecturers, Mashava Villagers. These
respondents will proved the researcher with the right information to answer the research
questions.
3.4 Research Sample
The researcher used stratified random sampling method, by using questionnaires and also
conducting personal interviews from the entire population. The stratified random sampling of
respondents was carried out from the strata’s, thus 5 RBZ staff members, 20 commercial
bank’s employees randomly selected from 16 commercial banks, 14 Great Zimbabwe
Univesity Students at Mashava Campus, 4 Lectures and 7 Mashava Villagers who are clients
to ZB Bank to makeup a total sample size of 50 respondents. This was done considering the
structural design of the Zimbabwean banking sector and the specific banking activities that
the sector encountered within the research period.
The advantages are the ability to capture key population characteristics, it often requires a
smaller sample which gives a greater precision, hence minimising costs, and mainly it
ensures that particular groups in a population are adequately represented in the sample and
improves efficiency by gaining greater control on the composition of the sample.
Table 3.1 Research Sample
Respondents Description Weight of Respondents
Commercial bank staffs 20 40%
RBZ representatives 5 10%
GZU students 14 28%
GZU lecturers 4 8%
Mashava Villagers 7 14%
Total 50 100
Source: Raw data
3.5 Data Collection Methods and Instruments
To ensure reliability and relevance of the information resulting from the research and also for
in-depth knowledge about the subject matter, the researcher employed qualitative and
quantitative approaches which were derived from primary and secondary sources.

16. 3.5.1 Primary Data
One of the main advantages of collecting primary data is the greater amount of control that
the researcher have in determining the methods used, and time period to collect the data. This
enables the researcher to focus on specific aspects of the research. In addition, by using
primary data the researcher is most likely to collect original, upto date and unbiased data. The
main disadvantage of primary data is that it consumes a lot of time, hence the researcher have
to manage time effectively.
3.5.1.1 Questionnaires
The questionnaire were composed of both structured questions which were simple and
relatively easy to administer and unstructured questions, which assessed the views of the
respondents without guiding them. Carefully chosen questions were enlisted to aid
respondents to answer only questions which were related to the topic under study.The
researcher prepared 16 questions, which is definitely not a small number. The questions seek
to dig deeply into the practices inside the bank and were very flexible. Respondents were
people who were busy, thus giving them questionnaires gave them sufficient time to respond
to questions hence giving accurate answers and deliver well thought answers
3.5.1.2 Interviews
The researcher conducted interviews to reinforce the questionnaires disbursed and also gather
other data. Two types of interviews were used which are telephone and personal interviews.
The interviews brought about information regarding individual experiences, knowledge and
opinions an in-depth or face-to-face interview was conducted on one to one basis to reveal
the underlying motives of the interviewee's attitudes, behaviour, and perceptions and allowed
much interaction between the interviewer and interviewee .Interviews were important
because they allowed the researcher to get an in-depth knowledge on the subject as contrasted
to questionnaires and they allowed the respondents to help the researcher in areas where they
had total knowledge.
3.5.2 Secondary Data
Secondary data is data that have been already collected by and readily available from other
sources. Secondary data helps to make primary data more specific and improves the
understanding of the problem. It also provides a basis for comparison for the data that is 26
collected by the researcher. However, it is very difficult to align secondary data to the current
research problem. For the purpose of this study secondary data was sourced from the banks’
financial and nonfinancial performance data sent to the RBZ quarterly, the published
financial statements, banks' annual reports, RBZ’s monetary policy statements and other
financial journal. It was necessary to use the secondary data because already existing data is
efficient and less costly to use. In addition, secondary data allowed the researcher to foster an
extension of the scope of data analysis thereby improve the quality of findings.

17. 3.3 Summary
The chapter is a layout of the research methods that the researcher employed for the purpose
of this study. This chapter defines the research design used as descriptive research design. It
also gave an insight into the research population, research sample and data collection
methods. The research population is characterised by commercial banks, depositors of the
banks and the Reserve Bank of Zimbabwe. This is because the research is mainly focused on
evaluating the impact of Liquidity crisis on the activities of commercial banks. Data
collection methods take the form of primary and secondary research with the RBZ
publications constituting much of secondary research. Finally data validation. This will be
done before moving on to the next chapter which will diagrammatically present and analyse
data from research findings.
CHAPTER FOUR
PRESENTATION AND ANALYSIS OF DATA
4.1Introduction
This chapter involves the presentation and analysis of data gathered from the questionnaires
which were administered on the sample selected. For the analysis, tables, bar charts, pie
charts and simple percentage will be used to present data while the test of hypothesis shall be
carried out using chi-square (X2) statistics. The statistical tool adopted was opted for because
it allows for effective understanding and interpretation of results. Furthermore, in order to
reduce the bulkiness of data, the data presented and analysed are those that are considered
relevant to the problems, Objectives and hypotheses of this research work
4.2 An Analysis of the Response rate
A summary of how questionnaires were distributed and the response rate in give in table 4.1
below
Administered Retuned/completed Response rate
Commercial bank staffs 20 14 70%
RBZ representatives 5 2 40%
GZU students 14 14 100%
GZU lecturers 4 4 100%
Mashava Villagers 7 6 85%
Total 50 40 80%
Source: Raw data
From table above, it can be seen that a total of 20 questionnaires we administered to
commercial banks staff but only 14 (70%) was completed and returned, 5 questionnaires was
administered to RBZ but only 2 (40%) was completed and returned, 14 questionnaires to

18. GZU student and all (100%) were answered, also 4 administered to GZU Lectures and all
(100%) were answered and finally 7 questionnaires administered to Mashava Villagers but
only 6 (85%) were completed and returned. In total of 50 questionnaires which were
administered a total 40 (80%) was completed and returned. This shows that the total
responses were significant to investigate on the effects of regulations and supervision on the
activities of commercial banks
4.2 Awareness of the Liquidity crisis in Zimbabwe
In order to evaluate the impact of Liquidity crisis on commercial banks, through assessing if
the depositors are aware of the Liquidity crisis on the activities of commercial banks, the
degree of respondents’ opinion was sought using a two-point.
Response Number of Response Percentage
YES 39 81%
NO 9 19%
TOTAL 48 100%
Source: Raw data
In relation to whether investors are aware of the impact of liquidity crisis on the activities of
commercial banks, table 4.2 show that 39 (81%) of the Dipositors are aware and 9 (19%) of
the depositors are not aware. This implies that most of the depositors are aware of the impact
of the liquidity crisis on the activities of commercial banks
4.3 Summary of the Chapter
Overall, research findings on the effects of Liquidity crisis above clearly confirmed that
commercial banks are heavily affected by the liquidity crisis which is rocking in Zimbabwe
currently. The next chapter summarizes the research findings and gives conclusion and
recommendations on the research topic of the effects of regulation and supervision on the
activities of commercial banks

19. CHAPTER FOUR
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1Introduction
In this chapter, the researcher will provide a summary of the study and make conclusions on
the results obtained for each research objectives. The research will also include a brief
comparative narration of the conclusions that were reached by other authors.
Recommendations and suggestions for future research will also be provided in this chapter
5.2 Summary of the Study
The primary objective of this study was to evaluate the impact of liquidity crisis on the
activities of commercial banks. Different authors and scholars on the field of study reviewed
suggested theories that were given by the researcher. Observations and statements renowned
authorities and legends on the subject also found their way in the review. This was provided
as literature review to support the study. The research used descriptive research design to
achieve this objective as well as the secondary objectives. In the study the research used a
population of 16 commercial banks, depositors and the RBZ, from which a sample of 20
commercial banks staff, 25 depositors and 5 RBZ staff was drawn. The sample was drawn
using the stratified random sampling technique. From the findings it was observed that
Liquidity crisis has a negative effect mostly on bank lending and it reduce public confidence
in the banking sector. The researcher also found that most of the depositors are aware of the
regulations on the activities of commercial banks.
5.3 Conclusion
From the investigation carried out by the researcher, the study draws the following
conclusions:
• The Reserve Bank of Zimbabwe’s loss of the lender of last resort function since
dollarization has posed difficulties in the operations of banks especially with regards to
liquidity challenges, leading to reduction in profit levels • Capital adequacy and asset quality
were found to be major causes of bank failures in Zimbabwe.
• The Liquidity crisis in Zimbabwe distress the performance of commercial banks.
• Depositors’ confidence in the banking system reduced because the industry offer millipede
serves as a fruit of Queues and chaos.
• Effective bank supervision is important in protecting depositors' funds and avoiding Bank
runs through proper management of the available funds to maintain the reputation of the bank

20. 5.4Recommendations
In order for commercial banks and the RBZ to reduce liquidity crisis and achieve stability in
the financial sector. The following recommendations may be put in place.
 Increasing the supply of the United States Dollar.
This can be achieved by looking at all the sources of foreign currency. The solution is
therefore to open up the economy and increase the injection or supply of more United
States dollars into the Zimbabwean economy. This is where the policy matrices of
Zimbabwe have to change in order to attract FDI and fresh capital. The researcher
concluded that the Indigenisation policy negatively affect the country since it hinders and
restricts Foreign Direct Investment which emerge economies and create HOT MONEY
that is the flow of cash from one country to another by investment. Without any
prevarication or ambiguity, the Indigenisation policy must be the very first policy to be
dealt on. It is one of the huge elephants in the living room. As a matter of emphasis, the
main obstacle is the toxic confidence crisis which requires a political solution. Inclusivity
and national dialogue, more than farcical elections, can resolve the confidence crisis.
 Restoring international relations in order to get official development assistance
(ODA)-bilateral.
 Resolving the debt trap through the HIPC system in order to get multi-lateral
balance of payments support.
 Nostro accounts
In order to meet the requirements of depositors, banks may recall funds from their off-
shore accounts (nostro accounts). These funds are normally reserved for foreign
payments. For some time now, banks have been bridging their balance sheets from
nostro accounts and most nostro accounts have been depleted. Banks can no longer
resort to that facility.
 Implement programs and ways which create public confidence to the RBZ
It is beyond any reasonable doubt that people of Zimbabwe do not have confidence
about the Reserve bank of Zimbabwe because of memories of 2008 and the
hyperinflationary Zim- dollar period are still fresh in the minds of the people.
Therefore the government must seek to boost confidence among its citizens so that
they comply with the implemented policies. For example the Reserve Bank announce
the introduction of Bond notes to cater the current liquidity crisis or to reintroduce the
Zimbabwe dollar the public will agree, acquiesce and adapt in accordance with the
implemented policies.

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