THE new Zanu PF government should fully re-engage multilateral financial institutions to secure long-term financing as well as lift a cap on bank charges and interest rates, a senior bank executive has said.
BERNARD MPOFU
In an exclusive interview with NewsDay Business recently, ABC Holdings chief operating officer Francis Dzanya said a memorandum of understanding (MOU) signed in February to lower bank charges and interest rates has resulted in the local banking industry revising their profit margins.
ABC Holdings Limited is the parent company of a number of sub-Saharan Africa banks operating under the BancABC brand that offer a diverse range of financial services, including personal, business and corporate banking as well as asset management, stockbroking and treasury services.
Dzanya said failure by the Reserve Bank to play its role as lender of last resort had also had an impact on the cost of lending, adding that banks are borrowing hot money offshore for on-lending to key economic sectors.
Under this arrangement, banks will, with effect from last February, charge up to 0,5% of the cash withdrawal amount subject to a minimum charge of $2,50, while ledger fees, maintenance and service fees will cost up to $4 per account.
The central bank and the bankers also agreed to push for the mandatory use of debit cards. Automated teller machines, according to the MOU, will now attract a withdrawal fee of $2.
“The MOU has had an impact on our margins. In an environment where there is a liquidity crunch, the cost of money is relatively high. I think now with an election result that we have we should be able to re-engage the international community because what we need in Zimbabwe is to improve the liquidity of the currency in the market. Once you are able to improve the liquidity, the cost of money will definitely come down,” Dzanya said. “What government was trying to do by capping interest rates was to help business people, but the reality was that banks were not out to extort money, banks were dealing with hot money and hot money is expensive on a market where there is no lender of last resort. That is what was causing interest rates to be high.” Point-of-sale machines now attract a fee of between US10 cents and US50 cents while no charges shall be levied on cash deposits. The pact also exempts senior citizens above the age of 60, from all bank charges, including maintenance fees except where such accounts are used for conducting business-related activities. “But now, with this peaceful outcome of the elections, we are now hoping that the liquidity of the US dollar in the market will improve. The Reserve Bank will now assume its position as lender of last resort, banks will now be able to trade amongst themselves, so that should naturally remove the need of capping interest rates. What the government should be encouraging is to say all banks should regularly bring out their charges,” Dzanya said. In June, the International Monetary Fund agreed with Zimbabwe to monitor the country’s programmes until the end of the year, paving the way for the country to clear billions of dollars of its debt arrears. Zimbabwe has a $10,7 billion external debt. Meanwhile, BancABC says it plans to meet the revised minimum capital requirements by next June. The central bank raised the threshold to $100 million from $12,5 million and banks are expected to fully comply by December next year.
