Banks Ripping Off DepositorsFaith ZabaAll Africa Global Media
BANKS in Zimbabwe are ripping off their depositors by charging inflated interest rates ranging between 15% and 25%, and imposing exorbitant bank charges which have seen them making massive profits in an ailing economy.
Impeccable sources in the banking sector told the Zimbabwe Independent this week commercial banks, merchant banks and building societies earned close to US$192m in interest on loan advances and leases and more than US$118m from other charges.
Each banking institution earned between US$1 million and US$16m in bank charges between January and June 30.
While the official interest rate charges are said to be between 15% and 25%, sources revealed that some banks even charge between 25% and 40%.
On interest income from loans, advances and leases, the banks have each earned between US$1m and US$61m.
While other sectors of the economy are struggling to survive, with many companies downsizing or closing shop, most banks are posting impressive results.
CBZ posted a profit after tax of US$18,3m in the half-year ending June 30, BancABC US$6,5m and Kingdom Bank US$1,3m.
Barclays posted a net income after tax of more than US$400 000 while other international banks such as Standard Chartered Bank recorded more than US$8m.
In his monetary policy statement two weeks ago, Reserve Bank of Zimbabwe governor Gideon Gono said there was need to ensure depositors are not subjected to the current "unacceptable" high and usurious practices in the charging of interest rates, exorbitant fees and charges by banks and other lenders, as well as the non-payment of interest on depositor and savings accounts.
Announcing a cabinet decision last week endorsing new capital requirements, acting Finance minister Gorden Moyo said: "I am also happy to note that the central bank will be taking steps to curtail unacceptably high interest rates that borrowers are being subjected to nowadays and that bank charges and fees will be swiftly dealt with as directed by government."
"I urge you, governor (Gono), to get together with your bankers and deal with these urgent issues."
Commercial and merchant banks are required to have capital of up to US$100m by 2015, building societies US$80m, discount and finance houses US$60m and microfinance institutions US$5m.
In a letter dated May 31 2012 to the RBZ seen by the Independent, Bankers Association of Zimbabwe president George Guvamatanga argued charges and interest rates charged by banks were fair, competitive and in line with the prevailing money market conditions.
"It is appreciated that the community at large does not perhaps fully understand the economics of charging fees and that they are traditionally not accustomed to paying fees," Guvamatanga wrote. "Thus, bank charges appear to be unfair. This reflects that customers are not aware of the level of costs that banks have to incur in order to provide the extended variety and quality of banking services offered in Zimbabwe.
"Further, we realised that people do not fully appreciate there is no direct relationship between bank charges and deposit interest rates, as the former are informed by operational costs and the latter are driven by liquidity. To that effect, banks have become soft targets for consumer advocates, politicians, business and community service leaders, workers' representatives and other lobby groups."
He said although banks in Zimbabwe were small, their operating costs were relatively high and spread over a thin customer base, resulting in high costs per unit.
Guvamatanga said banks spent huge sums on infrastructure and system costs as well as training and development of staff at different levels to ensure employees possessed skills and risk management specialisation.
In addition to this, banks were operating on generators and had to purchase water for most branches, he said.
"These considerations form an integral basis for calculating charges in relation to the cost of providing various services."
Guvamatanga said it was unfair for borrowers to subsidise non-borrowing customers who make extensive use of transactional services.
He said the trend now was that non-interest income had become the key driver of bank revenues worldwide.
The unit cost of each service, Guvamatanga said, included direct and indirect costs incurred to maintain infrastructure, services and the ever-changing global advances in banking.
He said dormant accounts also incurred costs to banks as they would still be required to pay licence fees and have dedicated personnel to monitor them.