The financial sector has been one industry that’s performing quite well in recent memory in Zimbabwe. This partly owed to the stringent lending practices which have dramatically reduced non-performing loans and the bank’s disproportionate investments in treasury bills and mortgages.
But there is one component which has propelled it to profits that you won’t notice if you don’t sit down to take a look at their balance sheets. That is, bank charges or bank fees. These are fees which you get charged for account set-up and maintenance, and minor transactional services etc. These include fees such as account balance inquiry, charges for re-activating a bank account, charge for transferring money from one account into another account in the same bank etc. Even though the charges are clearly stated up front, that doesn’t mean its fair to get charged. Some seem so petty (balance inquiry charge), you can’t help but wonder if the bank is using them just to make some extra cash. But it’s from these kinds of fees, that Zimbabwean banks are making tremendous profits.
What Zambia did
These charges are not found in Zimbabwe only, even Zambians were being charged these too before Zambia’s central bank took it upon itself to make sure that customers no longer get ripped off. The central bank of Zambia met with all the financial institutions and it asked them to justify 26 bank charges, to which the banks failed to convince it. Then the central bank just woke one day instructing all banks not to charge 26 certain types of bank fees. How’s that for a central bank that’s promoting financial inclusion? That’s something worth copying for Zimbabwe’s Reserve Bank of Zimbabwe (RBZ), isn’t it? Download the document by Zambia’s central bank here.
The bank charges don’t make sense: A case for Zimbabwe
If anything, (Zimbabwean) banks should pay us (earning interest on our savings) rather than pay them (through the fees they charge us). Logically, the role of the bank is to provide a safe place to keep our money, and sometimes the opportunity to earn interest on our deposits. Yet, we are not earning interest for keeping our monies in their vaults, instead, they charge us these feeble charges.
What the RBZ doesn’t know is that it’s handicapping our banks by leaving them to rely on non-interest income (money generated from these bank fees) instead of earning interest income (revenue that’s generated from lending) by lending to productive sectors. Actually, Zimbabwean banks seem like they are losing their risk appetite, partly because their revenues are buoyed by non-interest income.
Take a look at where the bulk of their lending and investment is going; treasury bills and building houses (for mortgaging). No wonder the bank lending trajectory has been on a downward trend at a time when companies are desperately in need of working capital. Instruct the banks to remove needless fees (many of them), that way they may open more avenues to earn revenue or increase their lending instead of living off our hard earned money by charging us unwarranted bank fees.