Zimbabwe banks need to reform

The Reserve Bank of Zimbabwe (RBZ) should effectively play its regulatory role, so as to protect depositors from fly-by-night tricksters disguised as bankers

The Reserve Bank of Zimbabwe (RBZ) should effectively play its regulatory role, so as to protect depositors from fly-by-night tricksters disguised as bankers

Nick Mangwana View From The Diaspora

If the whole culture of banking in Zimbabwe does not change then there will also be no interruption to the cycle of negative returns. . . A cyclical treacherous road to bankruptcy for the banks if they don’t reform.

On a Facebook post encouraging Zimbabweans to have a culture of banking, there were a lot of negative comments. It became very clear that the banks in Zimbabwe are not playing fair.

To think this is not even a game but is meant to be the fulcrum on which any national economic system is pivoted, makes their whole conduct scandalous in the least. The barrage of derisory comments pointed to a system that if not reformed, will remain in self-destruction mode. That term again, “self-destruction” has been in vogue in as a far as describing a lot of institutions and systems of this lovely country. Is it being erroneously used here? Let us see.

The bulk of the comments indicated that whenever one deposited money with the bank, and they go back to withdraw some of it, one will always find that the balance is less than the deposited money. Here is the conundrum, that never happens with the money under the mattress even if the effect of rats is taken into account. Isn’t this a travesty? The bank charges are ridiculously high. One is charged $5 per month for just having that account which they classify as Service and Ledger fees, 1 percent for choosing to withdraw that money from over the counter, 2,5 percent per ZimSwitch fee and the list goes on.

A perfunctory survey of the average worker who keeps their money in the bank in Zimbabwe, shows that they pay an average of $25 per month in these charges. If a person earns say $400 then $25 is a lot of money to lose to the banks. The interesting thing is that the same international banks like Barclays, have different packages for their customers in countries like Britain. Let us have a look at what those packages are.

For £15 which is well under $25 per month one gets their mobile insurance covered, their travel insurance to any destination covered, access to over 800 VIP lounges, their home insurance covered as well as other frills like car breakdown cover. That is what less than $25 per month gets you. People have been known to travel to Zimbabwe, get afflicted by this or the other ailment and have their medical bills at a private hospital fully taken care of by merely having such an account.

If one’s car breaks down, one calls for roadside help based on the same £15 per month and the list goes on. Of course these are packages that are suited for the consumer in Europe and their lifestyle. The consumer in Zimbabwe can benefit from a banking creativity of the same nature. After all one would think of packages where for the same $25 one gets a funeral policy covering the family, livestock insurance, mobile phone insurance etc. It is such trimmings that encourage the population to put their money in the bank, because the idea is not just about having one’s money in a secure place.

Someone is right now ready to argue that banks have overheads and other bills to pay as well. They are a business and they have to make money from somewhere. That point is conceded. But when there is a clique of a hubristic bunch of executives who are paying themselves $20 000 a month plus free private school allowance for all their children (including those not known at home, plus full tuition fees to foreign universities for the said children, plus unlimited cellphone allowance including international calls (to ask their children what they had for dinner), plus unlimited fuel allowance, plus entertainment allowances, plus grocery allowance, plus guards at home and professional chefs plus this plus that in the house, how honestly can one justify that a struggling small to medium enterprise putting money in the bank today, only to get less than what they put in tomorrow so that the executive can live in loftiness of grandiosity, should keep on being charged.

Should the said vendor decide to keep their money under the mattress and the banks go under for lack of depositors why would people complain? Isn’t it the nature of banking that a bank takes another person’s money and loans it to the next guy at a profit? That’s one simplest way of looking at it, right? If that is the case then why do these banks in Zimbabwe hardly give any sensible interest and still charge an extortionate rate when they lend on?

Granted banks borrow on the international market and they also pay fees and interests. That may be the case but let everyone focus on domestic transactions for now. Why are depositors being paid very little in return for their savings? So what is the incentive of one depositing their money with the bank? Is it security? That is another whole new issue.

History has shown that Zimbabwean banks are not as secure places as they used to be. Let us face our own demons, in that at the heart of everyone one of this shameful list was bankrupted by sloppy governance and criminal conduct. United Merchant Bank, Universal Merchant Bank, Trust Bank, Time Bank, Barbican Bank, Genesis Investment Bank, Intermarket Discount House, Rapid Discount House, Hyveld Discount House, Capital Bank, Kingdom Bank, CFX Bank, Century Bank, if we continue to list these the editor might sanction the columnist for wasting allocated space labouring a point. Need more be said? On this list there are banks that came out of the ashes of another defunct bank that went the same way as its predecessor because new owners behaved the same way as former ones.

How can there be confidence in the financial system of a country when this happen in an economy the size of Zimbabwe? Were all these banks even necessary? Was there even a ready market for their products or from the start their intention was to fleece depositors? Something like, “I want to make some cash, let me think, ah hooray, let me open a bank!”. Now that there is this history what insurance is there in place that assures depositors a full guarantee to recover their money should a bank fail?

After all the above failures and people lost a lot of money, the financial sector in Zimbabwe was supposed to reform itself. New legislation and regulations and make believe safeguards were instituted. Clearly not enough was done because of how people perceive these banks.

This columnist randomly asked 18 very patriotic Diasporan Zimbabweans whether they had money in their accounts in Zimbabwe. The answer was either a no, or a knowing smile or a cynical laugh. For the sake of this snap survey answers were sought, so the participants were also asked why. The general answer was that they did not want to lose their money as the sector was quite unpredictable. They were then went on about the frequency of their visits to Zimbabwe. This was to check on their level of emotional and financial commitment to the country.

The assumption was that the more frequent one visits the country the more likely they are to keep some money in Zimbabwe as they possibly have something going on there. The average visit per year was twice. The summary of the answers why all these good people do not keep money in Zimbabwe despite going there frequently is that they don’t trust the banks there, and there is no assurance that if something happens to the banks they will get their money back and in a timely manner if at all it comes.

Wait a minute. If this is the perception being held by Zimbabweans, who are still highly emotionally invested in the motherland, how do the banks that are putting up products and packages to lure Diasporan deposits and investments doing it? Some are being met with scepticism and derision. One has a former Diasporan at its helm and he is a bit clued on regarding how Zimbabweans outside the country see things. The same applies to the Group chairman who is also a Diasporan. But that is not to say this bank does not have issues as well regarding these rip-off charges. No, those charges appear to have been industrially cartelised.

There have been far too many banking scandals in Zimbabwe starting with the Reserve Bank of Zimbabwe (RBZ), all the way down to those formed by seemingly pre-pubescent school boys around 2000. At the heart of all this was greed.

Things might have moved on slightly from those ENG days, but the greed issue remains not only in the banking sector but corporate Zimbabwe. But if the banks continue to ignore public anger and cynicism then the financial sector in Zimbabwe is never going to fully recover. The days when it was fashionable to own a bank, because it was a legitimised money laundering scheme should be a thing of the past. Depositors money does not belong to the banker.

If the whole culture of banking in Zimbabwe does not change then there will also be no interruption to the cycle of negative returns. Banks will continue to try to pick themselves up by loaning at those usurious rates using highly inflated real estate value as collateral, all resulting in them foreclosing on these artificially priced houses, which will never realise what they are owed by the client in this life and the afterlife. A cyclical treacherous road to bankruptcy for the banks if they don’t reform.

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