International Journal of Research and Innovation in Social Science (IJRISS) | Volume III, Issue X, October 2019 | ISSN 2454–6186

An Investigation of Corporate Governance Challenges Facing Indigenous Banks in Zimbabwe

Dr David Foya¹, Garainesu Changunda²

¹Department of Business Management, National University of Science & Technology, Bulawayo, Zimbabwe
²Chief Finance Officer People Own Saving Bank, of Zimbabwe

Abstract: – The Indigenous banks in Zimbabwe have gone through many challenges in observing the internationally accepted best practice in corporate governance. These challenges remain pertinent despite the initiation of several mechanisms by both the government and the regulatory board, RBZ. Hence the purpose of this study was to explore the challenges faced by indigenous banks in corporate governance best practices. In view of the above, the objective of the study were to as certain challenges that indigenous banks are facing with respect to the role, composition and accountability of their boards of directors, determine the level of compliance with best practice in risk management with special focus on compliance with the Banking Act and National Code of Corporate Governance in Zimbabwe (ZIMCODE), scrutinize challenges on disclosure and transparency in indigenous banking institutions and establish problems arising from the ownership structure and the role indigenous shareholders play in engendering compliance with principles of corporate governance. The methodology applied in this study was a mixed research approach which is both quantitative and qualitative. Questionnaire and interviews were used to collect primary data from the participants who were mainly from the indigenous banks’ board, senior, middle and lower management. The study population were 95 participants that comprised of 85 for questionnaires and 10 for in-depth interviews. Purposive and convenient sampling techniques were used to select the participants. The major findings of the study were that indigenous banks were dominated by males. Most of the board members and other senior appointee were found to be working contrary to the principles of good Corporate Governance. Results also revealed that many indigenous banks were not complying with standards required by the regulatory authority in Zimbabwe, RBZ. It was concluded that several indigenous banks’ compliance with best practice in CG leaves a lot to be desired as Zimbabwe’s economy continue to face challenges. It is therefore recommended that indigenous banks should be required to comply with ZIMCODE to promote sustainability in their operations. Further areas of study would include eexamination of the challenges of corporate governance in the entire financial institutions in Zimbabwe and the investigation of the extent to which bank supervision is vital in protecting depositor’s funds and prevent bank failure.

Keywords: Corporate governance, indigenous banks, ZimCode, financial institutions