Sundaymail Editor
The Reserve Bank of Zimbabwe (RBZ) recently announced that banks will begin paying interest on deposits next month in compliance with Statutory Instrument 65A of 2020. Our reporter HARMONY AGERE spoke to Bankers Association of Zimbabwe (BAZ) president Mr Ralph Watungwa on this and other matters in the banking industry.
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Q: Is the banking sector capable of complying with SI 65A of 2020 and how will it contribute to the revival of the banking culture in the country?
A: Banks have always been paying interest on savings and fixed deposits as part of normal banking practice. Unfortunately, most customers have been keeping their deposits in transitory deposit accounts such as current accounts and call accounts, which do not attract interest in line with global banking practice. The reason for this is that funds held in current and call accounts can be held in the bank for very short periods of time, which makes it almost impossible for the banks to deploy the resources into longer-term initiatives that earn interest.
Our records show that more than 90 percent of total bank deposits are held in these accounts. Banks are capable and willing to pay interest on deposits held in savings and fixed deposits, as they are able to lend such funds and generate revenue from which interest to depositors is paid. Accordingly, banks are keen to see the banking public keep their deposits with their preferred banks for longer periods of time and earn interest. This way, customers can save and grow their money over time. We encourage customers to contact their bankers to learn about the many products that can reward them with interest. Through longer-term deposits, savers are able to contribute towards the growth of the economy as banks will be able to lend to productive sectors.
Accordingly, to the extent that the SI encourages payment of interest on savings, the public should respond by depositing their hard-earned savings into banks rather than keep them at home where they are idle and are exposed to various types of risks of loss.
Q: What is BAZ’s position on the bankability of 99-year leases and how best can holders be financed?
A: The banking sector has made its position clear on the issue of land tenure. In short, it is the recipient of the land that should be comfortable with the features of the 99-year lease.
Once they are convinced, we will see them invest their own money on the farms before reverting to banks. This is what makes their farms more valuable. Investments can be in the form of dams, housing, fencing, boreholes, roads, power supply, etcetera.
Please note that even under the current environment, the banking sector has been assuming a bigger role in financing agriculture in this country. The recent launch of Agricultural Finance Corporation (AFC) by His Excellency, the President of Zimbabwe, and the transition of finance of Command Agriculture from Government to the banking sector is a major step towards creating a viable agribusiness model. More can be done, but there is no doubt that we have made major strides thus far.
Q: Bank robberies are increasing, particularly during transporting cash, what measures are banks putting in place to tighten security?
A: Banks are concerned about this development and have been working around the clock to ensure that this risk is mitigated. The first step is encouraging the public to bank their hard-earned savings. Banks have introduced low-cost accounts where customers do not get levied the usual bank charges.
The second step is the assurance that the banking sector’s liquidity is strong.
This gives customers peace of mind that they will be able to avail their money as and when they need it. We are now driving the issue of how our customers can create wealth through interest earned on their savings, both Zimbabwe dollar and US dollar.
Digital platforms that allow customers to securely bank from anywhere and at any time affords added security. The many electronic payment platforms are a great way of dealing with the robberies that you refer to.
Q: In US dollar terms, are hard currency deposits improving?
A: We can confirm that foreign currency deposits are increasing since the public were given the option to pay for goods and services in USD. We believe that this trend will continue as inflation reduces and issues around time value of money, especially on the Zimbabwe dollar, are resolved.
The financial inclusion initiatives have seen more customers, such as women and SMEs who were previously excluded, entering the formal sector by availing loans from banks and microfinance institutions and banking their sales revenues. We expect to see more deposits going forward.
Q: What is the status of the hard cash (ZWL) shortage situation in the country? Are banks still struggling to dispense cash to their depositors?
A: Banks have been able to dispense as much cash as they have through their banking halls and ATMs within the guidelines as set by the central bank. While we appreciate that customers are keen to use cash in their day-to-day transactions, we would prefer that they use electronic platforms to transact.
These new ways of transacting are undoubtedly the payment mode of the future. They are efficient, less risky to use, more environmentally friendly and in line with global trends. I am sure the public is already aware of the growth of other forms of electronic money which are already changing the way we transact.
The banks would like their customers to embrace these new electronic payment tools rather than be left behind in this transition because the future of banking is digital.
Q: It has been claimed that Zimbabwe has one of the most expensive loans in the region. What is being done to address this issue?
A: We agree that lending rates are higher than normal in Zimbabwe. There are many factors that drive interest rates, some of them being inflation, country credit risk ratings and the general cost of doing business.
Unfortunately, the current environment has created many challenges on most matrices.
The banking sector is always striving to achieve positive real interest rates and this is possible when we lend above the inflation rate. Currently, inflation is still in the three-digit territory while lending rates are around 45 percent.
This means that banks will continue to destroy value until such time as inflation falls below lending rates. The market can be rest assured that banks care about the welfare of their customers and will adjust interest rates at the earliest opportunity to ensure the least burden to borrowers.
Q: In monetary terms, how much support has the banking sector extended to SMEs?
A: Zimbabwean banks have been at the centre of supporting all sectors of the economy since 1892.
The exact extent to which the banking sector finances this sector is debatable as funds used in SMEs are disguised in many forms. Please note that apart from what we define as formal SMEs in our books, many sole proprietors do borrow in their individual capacities through personal loans.
Sponsors of micro businesses tend to be employed and have a regular income and engage in diverse businesses that include farming, chicken rearing, trading and small-scale mining.
Fortunately, most personal loans offered by banks are unsecured, which makes them accessible to all classes of borrowers as long as they have a regular income.
Banks support the SME sector through value chains, where lending to the large corporates finds its way into this sector. While more can be done, we are proud to be playing this role that is driving economic growth and improving livelihoods.
Q: With regards to the obtaining global Covid-19 pandemic, what progress has been made by the banking sector in vaccinating its workforce?
A: The Bankers Association of Zimbabwe realises the serious threat posed by the novel coronavirus to personal health, our society and the economy at large.
Banks, both individually and collectively, are working with other key stakeholders as part of the national response.
Our response has been in forms which include the following: educating our staff and customers; direct procurement of PPE for staff; taking measures to protect staff and customers as they meet in our banking halls and meeting rooms through temperature testing and sanitisation; activating our digital capabilities to ensure customers can bank remotely; continuing to provide banking services during lockdown in support of essential service providers; commitment to hold pricing at pre-Covid-19 levels despite a hyper-inflationary environment; lobbying stakeholders to provide banks with more room to support customers, resuscitate their businesses following the extended lockdown; availing building facilities at no cost for use by front-liners in the fight against Covid-19; placing Covid-19-related imports at the top of the national foreign currency priority list; provision of temporary repayment holidays to companies who were paying their loans prior to the pandemic.
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