Assessing the importance of international banks in attracting FDI into Zimbabwe

Abstract

Globalisation has literally reduced the world into one market place where distance does not matter anymore and technology advancement revolutionised global trade. Unfortunately, as much as the world has become one village in terms of trade and capital flow Africa has lagged behind. Foreign Direct Investment has been low in Africa compared to Asia and Europe. This study was done to assess the impact international banks do have in driving FDI in Zimbabwe. It was born out of the fact that there is so much political attention to international banks and multinational firms from an indigenisation perspective. Zimbabwe desperately needs FDI to catapult economic development as local savings are too low to reinvigorate the economy. International Banks are believed to be key drivers of capital migration due to their ability to financially advise investors and also because of their capacity to attract cheaper funding for offshore investments. The research method used was predominantly quantitative and thus more inclined to positivism and a deductive research approach which was preferred instead of an inductive approach as the deductive approach is more reliable and objective in its findings. This was important for identifying causal effects of FDI movement vis a vis International Banks. The target population consisted of banks and their clients which allowed the writer to distribute 360 questionnaires with a response rate of 72.2%. Overally the findings of the research show that investors favoured foreign owned banks as opposed to local banks and the reasons were that foreign banks had greater access to international markets than local banks; foreign banks were also supported by their parent country governments; they had enhanced efficiency; enhanced corporate governance levels as well as more advanced financial technology and they also had more skilled and motivated staff. The data was analysed using SPSS. The research was limited to Harare only where most of the economic activity is and Head Offices of the respondents are based. From that perspective the study can be generalised for Zimbabwe as the sample was significant and also that a quantitative analysis was done. The implication of this research show that international banks play a pivotal role in attracting FDI into the country and their presence helps to retain the already invested capital.