Occasionally, I will randomly feature particular banks in this column because it helps readers to understand the broader financial sector better.
Financial Sector Spotlight with Omen Muza This new aspect of the column starts with the People’s Own Savings Bank (POSB) simply because it is one of a kind — the only bank mandated to primarily pursue a savings mobilisation model at a time when Zimbabweans’ savings habit is at its lowest ebb.
Enabling Act Unlike other commercial and merchant banks which are established in terms of the Banking Act, the POSB was created in 2001 in terms of the POSB Act, and is wholly owned by the government.
Delivery channels In addition to a 32-branch network, POSB has a key agency relationship with Zimpost, which brings close to 200 branch agents to the delivery channel mix. Zimpost reportedly handled an average of 4% of the bank’s business in early 2012.
POSB also has strategic relationships with Western Union, Paynet and Zimswitch.
Minimum capital requirements POSB is not required to comply with the minimum capital requirements prescribed by the the Reserve Bank of Zimbabwe from time to time, which is why, at a time when commercial banks are expected to have a capital position of $50 million, it had a total equity and reserves position of only $13,5 million as at June 30, 2013.
While this may look like a reprieve, it is actually a handicap because with that kind of capital, POSB cannot compete effectively against better endowed banks in an illiquid market.
Corporate tax The bank is exempted from paying corporate tax on profits. Consequently, its financial statements do not have line items for profit before tax (PBT) and profit after tax (PAT), just profit or loss for the period.
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As at the June 30 2013, POSB made a loss of $130,956 on the back of net operating income of $9,41 million mainly driven by fee and commission income, against operating expenses of $9,54 million.
Since it is not required to pay corporate tax, POSB is the only bank that can offer tax-free interest on all investments, a basis for management’s claim that their savings products offer some of the best terms on the market. Additionally, both the bank’s corporate and individual deposits are guaranteed by government on a dollar-for-dollar basis.
Three-star mobile banking The fact that POSB has a mobile banking product operating under the POSB Cellphone Banking and the Kutinya Tinya Chete brands is in itself unremarkable because several other banks have similar products.
What sets POSB apart is the fact that it was the first bank to be linked to all the three mobile network operators — at once.
In a bid to reposition itself and compete on an equal footing with other banks, in mid-2011, POSB secured an authorised dealership licence from the RBZ, allowing it to open offshore banking accounts and engage in international banking activities.
While this is a necessary condition for POSB to attract corporate clients who require international banking services, on its own it is insufficient for a significant change of fortunes in terms of market share because of prevailing market perception.
Market perception The bank is still perceived as primarily geared to cater for rural-based population, that happens to be the least liquid at the moment. Enhanced perception management, coupled with diversification and modernisation of both the underlying product offering and delivery channels to include international credit cards, Internet banking and a wider ATM network are preconditions for a change in fortunes.
Restructuring: Whither savings banking model? POSB’s weak capital position, poor market perception and limited delivery options are in my view the strategic imperatives for the proposed restructuring process.
A strategic partner who can inject fresh equity capital and unlock access to external lines of credit, while providing the expertise and technology needed to improve banking operations, is sorely needed.
Government favours introducing a competitive “commercial” unit within the existing framework while preserving POSB’s original mandate of savings mobilisation and serving the grassroots as intended by its enabling Act.
For some, however, the solution lies in POSB coming together with Zimpost — a fellow successor company to PTC — under a government-sponsored scheme, to form a postbank of sorts.
Zimpost has the infrastructure and POSB has the banking licence and banking skills and together they cannot go wrong, so goes the argument.
