Banking charges too high – Government

GOVERNMENT has urged the financial services sector to lower banking charges for depositors amid reports that more than 84 percent of the sector’s profits were realised from bank charges as opposed to lending-generated interest income.

Speaking in Parliament in response to questions from legislators, Finance and Economic Development Deputy Minister, Clemence Chiduwa, said the Bankers Association of Zimbabwe (BAZ) should urgently look into concerns over high bank charges levied by financial institutions and align these with international market trends.

Broadcasting Authority of Zimbabwe (BAZ)

“I think this is an issue that we have been talking about in this Parliament. The bank charges that are being levied by our financial institutions are very high,” he said.

“Even if we look at the performance of our banks, above 84 percent of their profits come from bank charges and we have engaged the banks and BAZ.

“The major reason that they have given us is that most of their solutions are imported.”

In its half-year, Monetary Policy Statement, the Reserve Bank of Zimbabwe indicated that banks scooped aggregate profits of $181,25 billion for the half-year ended 30 June 2022, a 12-fold increase from $15,09 billion reported in the corresponding period in 2021.

While acknowledging the concern over charges, Deputy Minister Chiduwa said Government cannot direct banks to reduce the charges but was engaging BAZ to ensure the imported technical solutions, which are blamed for higher service costs, are localised.

“We’ve implored on BAZ to say let us try to ensure that the solutions that we use in Zimbabwe are local solutions,” he said.

“At the moment we can’t direct them to reduce the bank charges but what we are saying is, collectively as BAZ, they need to re-look at their charges so that they are in line with the market and they need to make sure that they are competitive and seek local solutions, especially for the software they are importing.”

Regarding the 200 percent interest rate, which legislators said was too high, the Deputy Minister said the Government merely applied basic economics as authorities aimed “to nip the speculative bubble” that was driving volatility.

Reserve Bank of Zimbabwe (RBZ)

“This is basic economics because the interest rate is supposed to follow the inflation rate. At the end of the day, what investors want is to ensure that they will get a positive return,” he said.

“As the inflation rate moves, the interest will also move in tandem but for this peculiar case in Zimbabwe, what we wanted was to nip the speculative bubble that was there. People were borrowing money to participate in the parallel market and there was no production which was happening.” -ebusinessweekly