‘Savings interest to stimulate domestic investments’

Oliver Kazunga, Senior Business Reporter
ECONOMIC analysts have hailed the move by local banks to pay interest on savings and fixed deposits beginning this month saying this would stimulate investment in the economy.

Through Statutory Instrument 65 of 2020, Finance and Economic Development Minister, Professor Mthuli Ncube, has directed banks to pay interest on savings accounts and fixed deposits. The directive was issued to promote financial intermediation and to stimulate production.

However, banks were yet to comply with the directive and last week the Reserve Bank of Zimbabwe (RBZ) issued a statement that financial institutions through their representative body, the Bankers Association of Zimbabwe, had agreed to the order.

This means financial institutions will, with effect from July 1, 2021, start paying savings accounts a minimum of five percent per annum on ZWL$, a minimum of one percent per annum on US$.

On fixed term deposits for ZWL$, the RBZ has said a minimum interest rate of 10 percent per annum shall be paid and a minimum of 2,5 percent per annum for US$ and there will be no bank charges on savings accounts and fixed term deposits.

Political Actors Dialogue (Polad) economic committee chairman Mr Trust Chikohora, who is also the Zimbabwe National Chamber of Commerce former president, said the RBZ directive was long overdue.

“It is very welcome and long overdue because banks should have access to that money and they will be on-lending it, and yet the people who would have put in those funds into the banks were not earning any interest from it,” he said.

“That was grossly unfair and it was not encouraging people to deposit their money into the banks on a more long-term basis.

“So, this is very welcome and it will also encourage people to deposit their monies in banks on long-term basis, which will be useful for harnessing foreign currency in the formal banking market.”

The RBZ has also advised the public that demand and call accounts were transactional accounts from which funds deposited can be withdrawn at any time and without advance notice. Hence, in line with global practice, banking institutions will not be able to pay interest on such transitory deposits.

“The fact that these accounts will not be charged bank charges, is also going to be helpful to the depositors and it’s really something that is very welcome because bank charges were also now on the high side,” said Mr Chikohora.

Financial market analyst, Mr George Nhepera, said paying interest on deposits was progressive.

“This is a good policy in light of the need to attract and boost savings in the financial sector. A country cannot improve on economic prosperity without savings because savings lead to investment,” he said.

The Confederation of Zimbabwe Retailers president Mr Denford Mutashu the payment of interest will excite depositors.