One of the reasons often cited for the country’s low savings ratio is that banks don’t offer attractive savings products.
Most of them do not pay interest on deposits, but charge interest on loans at rates above 10%, something Finance minister Tendai Biti has called “voodoo banking.” Resultantly, between $2 billion and $3 billion is circulating outside formal banking channels, when it could be harnessed to loosen up the prevailing situation of tight liquidity.
Speaking at an Affirmative Action Group (AAG) Banking Symposium in early June 2012 Reserve Bank of Zimbabwe (RBZ) Governor Gideon Gono assured stakeholders that the principle of earning interest on deposits was not dead, but he did not wish to pre-empt developments by making an announcement.
Instead, he challenged the Bankers’ Association of Zimbabwe to come up with initiatives to address depositors’ concerns so that he could make an announcement within 14 days.
The two-week ultimatum came and went without any announcement, but for their part banks have begun to respond in various visible ways.
Faced by the stimuli of both industry competition and regulatory pressure, banks must move or be pushed. Lately, the market has begun to see a number of new savings products. This article outlines some of the products through which banks seek to tap into the latent liquidity of the unbanked market.
In early July 2012, CBZ Bank Limited introduced the CashPlus Savings Account which they tout as a high interest account (though the interest rate is not disclosed up front) with no service fees, no withdrawal fees and no maintenance fees.
Given that withdrawals can only be made after nine months, this account is suitable for those saving for medium-term goals or projects. An initial deposit of $50 is required, which I think is sufficiently inclusive.
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Through the Housing Savings Account linked to CashPlus, CBZ are also seeking to bait depositors by undertaking to match their bank balances with loans towards the purchase of houses.
Not to be outdone, Tetrad introduced the Flexi-Cash Account to meet what they call “the recognised need for flexible and convenient banking.”
With daily interest earnings of up to 5% per annum credited monthly, Tetrad say Flexi-Cash’s unique selling proposition is its flexibility which enables savers to have access to their deposits at 24hrs’ notice.
The Flexi-Cash Account does not attract monthly charges and has been sweetened by a standby call loan facility.
In April 2012, way before the RBZ governor’s call, FBC Building Society introduced the Pfimbi/Isiphala Savings Account which earns interest on a monthly basis and does not attract any bank charges.
Being primarily a savings bank, it would be remiss on POSB not to throw a number of savings products into the fray. Accordingly, in the last quarter of 2011 the bank came up with three savings accounts.
Juniorsave is targeted at those under the age of 16, whom it seeks to teach the importance of saving, hence the minimum deposit amount of $5,00. Smartsave also allows one to save with as little as $5.
Easysave is a fixed-term account under which one makes a once-off investment and chooses a term that suits them from one, two, three, six or 12 months.
The minimum deposit is much higher at $100 as this account also caters for clubs and societies in addition to individuals. Benefits for all three accounts include tax-free interest and waiver of monthly service fees.
MBCA Bank Limited relaunched its savings product range on September 01 2011 for corporate and individual clients, with minimum balances of $500 and $100 respectively.
Barely six months later — ostensibly to improve the products but most likely due to a less than enthusiastic response by the banking public — the bank announced a raft of enhancements for the accounts in mid-March 2012.
These included waiver of monthly account maintenance fees, change in credit interest calculation to be based on daily cleared credit balances instead of minimum monthly balances.
Credit interest rate tiers were also introduced and minimum credit balances for corporates and individuals reduced to $150 and $20 respectively.
One feature which MBCA Bank — and indeed other banks — should lose if they are to encourage a sustainable savings culture is the condition that an account closed at the customer’s instruction within six months of being opened attracts an administration fee — $15 in MBCA Bank’s case.
Why should I be penalised for wanting to leave a bank when I find that it does not measure up to my expectations?
Another bank that has made public efforts to woo savings deposits is NMB Bank Limited which has for some time been advertising the NMBSAVE Savings Account featuring benefits such as a tiered interest rate, interest calculated on a daily balance and paid quarterly and no account service charges.
The big question is whether this proliferation of savings products will make a difference! If it does, the likely impact will be to increase the pool of domestic savings with a mainly twofold impact.
Firstly, availability of longer-dated finance can improve as banks leverage the pool of stable deposits to structure financing more suitable for development purposes.
Secondly, perhaps achievement of the medium-term plan target for national savings to grow to 25% of gross domestic product by 2015 can be within easier reach.
.Omen N Muza writes in his personal capacity. He is a banker and managing director of TFC Capital (Zimbabwe) (Pvt) Ltd, a Harare-based financial advisory company with interests in banking, technology and agriculture as well as the convergence area among others.
