Enacy Mapakame Business Reporter
INVESTMENT banker and business man Dr Nigel Chanakira says the prevailing banking sector charges are still too high and make the formal banking system expensive in an economy trying to rise from turmoils of the recent past.
Dr Chanakira, a prominent banker who rose to fame with his Kingdom Bank (which morphed into an expansive empire under Kingdom Financial Holdings) said bank charges in Zimbabwe were too steep compared to regional and other global peers.
He said this situation eroded the competitiveness of local companies. As a result, he said the sector may not reach the level it should in terms of bank deposits, although acknowledging the deposits were on a steady increase.
“Deposits in banks are on an upward trend, but I don’t think we will get to where we should be because bank charges are far too high. Look at the bank results and look at what they give deposits. I don’t think moral suasion is going to do it but in my view point it’s ridiculous.
“I am globally exposed and have never seen charges this high,” he said at the just-ended African Forum and Network on Debt and Development (ARODAD) and Zimbabwe Coalition on debt and Development (ZIMCODD) annual multi stakeholder debt conference in Harare last week.
“If I have forex, I will put it in a deposit box in a bank than deposit in a bank account because the charges are too high,” he said, adding it was now easier for banks to make profits out of charges more than through lending, which he said was “not the way to do banking.”
Of late, the banking sector has cashed in on interest income although the contribution of non-interest income to total banking sector income has continued to strengthen over the past few years as banks diversify sources of income.
Dr Chanakira, however, commended the macro-economic stability now prevailing in the country although he said more still needed to be done to improve the financial services sector competitiveness.
He said: “Re-engage and get sanctions off, reduce the cost of capital, and then we can see development. Avail medium to long term money, get rated, get competitive.”
Bankers Association of Zimbabwe (BAZ) chief executive officer Mr Fanwell Mutogo said the banking sector was similarly exposed to the macro-economic challenges bedevilling other sectors of the economy.
“We need to put things into perspective, macro-economic stability is very critical and has an impact on banks too. When prices of goods and services elsewhere go up, it also affects us as banks,” he said.
Mr Mutogo added that credit ratings for local banks had also gone down, which made it difficult for local financial institutions to source lines of credit for local industry needs.
“We are unable to fund meaningful projects and much of our loans are in the short to medium term against the market demand which currently has an appetite for long term financing,” he said.
According to the Reserve Bank of Zimbabwe (RBZ) Financial Stability 2020 report, all banking institutions recorded profits for the year ended December 31, 2020 with aggregate sector profits amounting to $34,24 billion.
Earnings are expected to remain on an upward trend as the sector continues to adjust to new operating conditions through effective risk management systems and digital banking models.
The report also shows foreign currency deposits amounting to $103,73 billion, accounted for 51 percent of total deposits, while local currency deposits and currency in circulation co-accounted for the balance of the money stock (M3).
The local currency deposits, transferable or demand deposits amounted to $88,66 billion (26,64 percent); time deposits, $9,91 billion (2,01 percent); and negotiable certificates of deposits at $1,44 billion (0,59 percent).
Nominal lending rates quoted by banks ranged between 5 percent and 65 percent by year-end while time deposit rates for 60-day and 90-day tenures registered maximum averages of 10,33 percent and 9,46 percent, from 7,12 percent and 7,70 percent recorded in September 2020, respectively.
Average maximum savings deposit rates, however, decreased from 5,19 percent to 4,69 percent, during the period under review.