Source: ‘Reduce bank charges to attract informal sector’ | The Herald October 9, 2019
Fidelis Munyoro Chief Reporter
Banking services should be free of charge to inspire informal traders to formalise their business by banking proceeds and rely more on plastic money, an economist has said.
In an interview with The Herald, Mr Tendai Chinamasa said the solution to the prevailing liquidity crunch should start with the banking business model.
He said using plastic money was too expensive in view of current bank charges.
“In some cases, plastic money facilities and services are poor in rural and remote areas because of poor signal connectivity and people don’t have bank accounts and/or the mobile device to transact. So this puts cash on high demand,” said Mr Chinamasa.
The majority of Zimbabweans are in the informal sector where millions in cash circulate on a daily basis, with cash shortages leaving the transacting public at the mercy of illegal dealers who are charging extortive commissions.
While some economists are urging the Reserve Bank of Zimbabwe to inject more notes into circulation, Mr Chinamasa has a contrary solution to the cash crisis.
He noted that during the passing phase of austerity measures underway, Government put in place economic safety nets like subsidised public transport to ease financial hardships on citizens.
Such reforms, he said, must also cover the banking sector to instil confidence among its customers.
“Some suggestions are that RBZ must put more cash in circulation, but I disagree”, said Mr Chinamasa.
“I think payment methods and alternatives should improve at cheaper transaction charges.
“Bank and electronic transaction charges are too high. I believe this problem has created the selling and scarcity of cash. I suggest the banks introduce a perhaps flat bank charge per month to cater for the general transacting public.”
Mr Chinamasa said a flat fee of up to $10 a month depending on usage of bank services would suffice.
This, he said, would mean the maximum charges per month will be capped at $10.
“Minimum charge might be two percent of a transaction,” said Mr Chinamasa.
“This example, if implemented throughout the banking and financial sectors, will see most consumers embrace plastic money and hence a drop in demand for physical cash.
“Fair bank charges will boost confidence and people will deposit cash in the banks and allow adequate circulation of cash in the economy.”
Mr Chinamasa urged Zimbabweans to focus on the “bigger picture” of production of local goods and services and exports to international markets.
This, he said, would build a stronger and respectable local currency all over the world and eliminate cash and other financial challenges the country is facing.
“One key to economic growth is to have our own currency that is functional and accepted internationally,” said Mr Chinamasa.