GOVERNMENT has warned banks and other financial institutions against engaging in “unethical standards and practices” such as charging depositors for opening bank accounts, as Treasury seeks to create a savings culture.
Source: Chinamasa warns financial insitutions over charges – NewsDay Zimbabwe January 12, 2017
BY TATIRA ZWINOIRA
This comes as the central bank has reported a trend of deposits skewing more to short-term deposits.
Speaking at the official rebranding of MicroKing Finance to Microcred Zimbabwe on Tuesday, Finance minister Patrick Chinamasa said banks and financial institutions could not expect to encourage savings with levies or extra charges on new accounts.
“How do you encourage savings if, in fact, you are imposing levies on people who are bringing money to you? These are issues that we are going to follow and monitor to see that the plans we have for the economic recovery of this country are not jeopardised by unethical standards and practices,” he said.
Chinamasa said such practices have also hindered government’s drive to formalise the informal sector.
“There is a consensus among stakeholders driving the financial inclusion agenda in Zimbabwe that broadening access too and usage of financial services stimulates financial savings, investment and an increase on the level of loanable funds. Where we are encouraging farm workers to open accounts and they have been doing it the charges that are being levied just for depositing the money is too high,” he said.
Chinamasa recounted a story, where an individual opened an account and deposited $90 in it, but $10 was deducted as service charges, a situation he said was unacceptable.
Short-term deposits are deposits that can be withdrawn any time and, thus, banks are unable to lend. They also offer lower interest rates for banks and other financial institutions make returns smaller.
Savings comes from long term deposits, which are tiered, meaning, they offer better interest rates and, thus, better profitability margins.
These types of deposits lead to better liquidity and finance in the market.
Chinamasa said the high charges were detrimental to efforts to target the unbanked, estimated to be 70% as of last year.
A recent report found that depositors were slowly moving away from banks due to, among other reasons, low trust in the post-hyperinflation era, regulations and fees in maintaining the account and a costly savings mechanism.