Indicated by substantial profits, last year was a prosperous year for all banks in Zimbabwe. Cautious but shrewd lending among other factors has contributed for banks to post these profits. However, the overall banking sector is decreasing its lending to households.
From 2016 up to now Zimbabwe is grappling with cash shortages and the cash shortages have come with unintended consequences that have seen bank’s non-interest income surging. Non-interest income is income earned by banks from the fees they charge and commissions. The fees range from transaction fees, insufficient funds fees, monthly service charge fees etc.
Ecobank, CBZ, Standard Chartered to name but a few have all registered rising non-interest incomes. The increase in non-interest income which is contributing to the rise of profit margins to many of these banks is giving them a reason for celebrating the current cash crisis.
Why is non-Interest Income rising?
The shortage of bond notes and foreign currency to make transactions is stirring people to increase the use of banking channels in transacting. For example, before the cash crisis people used to withdraw all their money as soon as it was credited to their bank account and henceforth they would make all purchases with cash.
Consequently, banks could only earn non-interest income from a single transaction.
But since the advent of cash shortages, people are finding it hard to make cash withdrawals. As a result, they are having to make all their transactions using the banking channels. This, in turn, is increasing the number of fees and commisions charged by banks as customers use banking services relatively more to the pre-cash crisis period. And more fees and commisions means more income for banks.
Banks are now having more channels to earn non-interest income but the growing use of mobile money services like Ecocash, Telecash, and OneMoney, owing to their convenience and comparatively lower fees, is migrating a substantial amount of non-interest income from the former to the latter.
So whilst banks are loving the cash crisis, they are frustrated by mobile money services platforms in their bid to maximize fees and commissions. The rising integration of banking platforms and mobile money platforms could mean that banks now want to maximise non-interest income by partaking in non-interest income accumulated through the use of mobile money platforms.