The Sunday News
THE banking culture in the country is set to erode again if the players in the sector and the Government fail to put measures that ensure depositors’ money is safe and customers’ service is improved, banking experts have warned.
This warning comes at a time when depositors, mainly with Metbank and AfrAsia, are enduring long queues to access their hard-earned funds.
Since the bank rebranded from Kingdom Bank to AfrAsia recently, it has been facing cash challenges resulting in its clients failing to get their monies.
The bank has put a withdrawal limit of as low as $20 per day.
Sunday Business witnessed some of the bank clients recently spending nights in the queue outside the Bulawayo banking hall in order to get served first the following day.
The bank’s Bulawayo branch is a major service point after the financial concern shut down branches in Victoria Falls, Hwange and many other branches in the region.
In an interview with Sunday Business, Lupane State University (LSU) Department of Accounting and Finance chairperson, Mr Julius Tapera, said the banking sector was facing a number of challenges which needed to be urgently addressed if the sector was to gain customer confidence.
“The effects of the 2004-2008 banking crisis are still being felt as a lot of the Zimbabwean companies and individuals still do not have confidence in the banking industry after the collapse of a number of banking institutions,” said Mr Tapera. He added that the process of confidence restoration in the sector would take a while if the challenges were not resolved.
Consumer Council of Zimbabwe (CCZ) chief executive officer Ms Rosemary Siyachitema said that clients were being shortchanged by the poor service from some banks.
She challenged the banks regulator, Reserve Bank of Zimbabwe (RBZ), to come up with policies that protect clients from poor service.
“The question that we have to the RBZ is; why are we getting information that the bank has collapsed when it has already collapsed. The RBZ, which looks at the health of the banks, should tell people in advance about the banks’ situation so that the people can do something with their money before it goes down the drain,” she said.
Ms Siyachitema said the banks should be transparent and give proper information to customers so that they could make informed decisions.
“There is something that is lacking because we just wake up to see a bank collapsed. A bank must be transparent and give information to their clients so that people are aware of the health of banks but unfortunately that information is not there. There is vagueness and opaqueness in the banking sector which results in people going to a collapsed bank,” she said.
It is estimated that US$4 billion is circulating outside the formal banking system as people are not willing to bank their money due to lack of trust and confidence in the banking sector.
Ms Siyachitema said the CCZ was pushing for the government to enact the Consumer Protection Act so that customers were protected.
“Action should be taken against the banking sector because they are shortchanging customers with impunity,” she said.
According to the RBZ recent monetary policy some banks, namely Metbank, Allied Bank, AfrAsia and Tetrad were facing liquidity and solvency challenges due to liquidity, macro and institution-specific challenges.
In the 1990s to early 2000 Zimbabwe had a vibrant banking sector with merchant banks, investment banks, discount houses, commercial banks and building societies.
The banks were supported by micro-finance institutions, asset managers and pension funds.
However, about 20 banking institutions have closed since 2000 namely Trust, Genesis, Royal, Barbican, Renaissance, CFX and Time Bank. Interfin Banking Corporation is under curatorship since 2012.
The United Merchant Bank, Universal Merchant Bank, First National Building Society and Zimbabwe Building Society are some of the other banks which shut down.
Most of the bank clients reportedly struggled to get their monies when the banks closed while some even failed to get a single cent.
Mr Tapera was of the opinion that the banking sector was over banked and the country should have fewer banks serving a wider market.
“The Zimbabwean banking is over-banked. While it was a very noble idea to open up the sector to local players . . . we would rather have fewer banks with wider branch networks to service clientele from different geographic locations,” said Mr Tapera.
Prominent economic analyst Mr Prosper Chitambara also echoed the same sentiments and said Zimbabwean economy was too small to accommodate the number of banks.
“When you compare Zimbabwe with, for example South Africa, Zimbabwe is at most a $10 billion economy with a population of 13 million people and we have about 24 registered commercial banks. South Africa which is the biggest economy in Africa, with about a $400 billion economy and has about above 50 million population, has only about 21 commercial banks,” said Mr Chitambara.
Mr Tapera said the low disposable incomes were also contributing to the challenges affecting the sector.
“Most of their transactions are really hand to mouth and there is very limited scope for savings, let alone investments. The individual customers also have limited account activity as those that get salaries through the banking system and in most cases withdraw the whole salary on pay day or the day after, leaving the banks with very little in their coffers,” added Mr Tapera.
Mr Tapera, however, said the current regulatory framework was trying to address some of the challenges and arrest further disintegration of the sector.
“The progressive or staggered increase of the minimum capital threshold for example is one of the measures that will guarantee some stability in the industry. The recommendation that those banks that are struggling to meet these thresholds consider merging is also very noble as it is ideal to consider owning a small shareholding in an institution that has a more secure future that have a significant stake in a struggling institution whose future is very bleak,” said the banking expert.
Efforts to get a comment from the RBZ were fruitless after the institution did not respond to questions emailed by this paper two weeks ago.
