adminA report I read sometimes back says a cool US$7 billion (which is more than the current total bank deposits) circulates in the informal sector.
If the financial services sector is really “like your blood stream” and “where the economic blood circulates,” as Finance and Economic Development Minister Patrick Chinamasa said in the House of Assembly on 6 May, then the effect of the current situation in this sector should be similar to that of a cardiopulmonary arrest.
A recent report from the central bank has indicated that the banking sector recorded low loans uptake as a result of high lending rates.
This means that the productive sectors are discouraged from accessing the much needed loans for critical working capital requirements.
The end result is obvious.
Banks attribute the high lending rates currently obtaining in the market to low quantities of deposits as folks still prefer to keep their money under their pillows. I read the Bankers Association of Zimbabwe’s appeal to stakeholders in last week’s edition of this paper. They were urging them to “use the formal banking channels and not keep money under the mattresses.”
But why do these stakeholders now prefer to have their US dollars under their pillows and mattresses? A report I read sometimes back says a cool US$7 billion (which is more than the current total bank deposits) circulates in the informal sector. This was not the case some years back in the ranch where this cowboy grew up, somewhere in the Low-veld. You see, the sugar plantations workers used to be paid in Zimdollar cash, and they would always make sure that they had opened savings accounts to keep their hard-earned money. A bank account would give them a sense of pride, and you would always see them carrying their “bank books” in their vest pockets. “Kudhirowa mari” (withdrawing money from the bank) was a popular parlance back then.
Not any more.
Things have changed!
Why do people now prefer to have it closer to their heads, under their pillows, risking having it stolen or God knows what? Is it really because it’s no longer earning interest in the banks? Is it really about earning interest?
In my view, informed by personal experiences, it’s really about the conveniences associated with accessing, processing or enquiring about your money in the bank — the very convenience that formal banks are apparently failing to provide, currently. This is not to imply that I am ignorant about other critical challenges facing the financial sector, or denying that the above-mentioned problem isn’t weighty enough.
Folks, I just am not happy with the inconvenience that banks are currently exhibiting in the delivery of traditional services. It’s simply very slow. I was at my bank this other day, a reputable one for that matter. For a busy branch in town, we were supposed to be assisted by just one client services executive and you can guess how long the queue was. One hour down the line, I was still to be served and many folks behind me were all complaining. It happened until the time when I was about to be served, then the excuses started to pour in.
First, it was a lactating mother whose child had been crying for eternity and wanted to be served before me. So I let her. Next was a senior citizen, and I obviously had to let him. Third was a middle aged woman who alleged that she had left her children unattended long enough in her car parked outside and had to be served early. They kept on piling and getting wilder, I think I heard somebody saying something like he was an alien from another planet and his plane was about to take off bla bla bla.
Bottom-line is no member of the informal sector wants to bring part of the US$7 billion circulating in their enclave to banks that can’t give them the basic convenience they are looking for, no matter how much the very banks can appeal to them to use the formal banking system. It’s simply better under the mattress.
When banks appeal to the public to use formal banking system, they should first look at their capacity to accommodate them. Why am I saying so? For starters, a total of nine banks went bust in the past four years, with the latest ones being Interfin, Capital, Allied and AfrAsia. The savers who chose to still use the banking system, following the closure of their banks, had to use the remnant banks. As if that was not enough, those remaining banks started to close some of their branches, which meant that their clients had to resort to the branches that remained in existence. I hear some banks even retrenched in the remaining branches. What you now typically see in banks is ten counters occupied by just three or four tellers.
Now, what that means is that the few bank staff has to be overstretched in order to try and serve the impatient clients.
Now, do you expect an informal sector entrepreneur who is standing in that long queue trying to open his first bank account to remain in that queue, while hearing all such complaints from those who already hold their accounts? Zviri zvivindi zvei?
Banks must get real! They must first put their houses in order before they start showering SOS for deposits. Whose deposits?
If banks can’t afford to employ more human resources, then they should try to be innovative enough to introduce adequate and effective information, communication and technology substitutes to cover up.
Otherwise, banks must not exude their hypocrisy and selfishness of calling for more deposits when they can’t conveniently handle current depositors.
I don’t want to close without remembering a representative of the informal traders who phoned me last week after reading my article where I applauded Government for introducing a mechanism to monitor imports. The gentleman said that the move will result in job losses to many informal traders who are thriving on selling second hand underwear and mabhero. Folks, I was really not irresponsible in supporting Government’s move. I don’t deny that it will kill jobs. Yes it will kill jobs, informal jobs, that is. And phenomenally replace them with formal ones.
Formal jobs come with security. Talks of things like pension, medical aid, etcetera. Now who doesn’t like that?
Online Reporter