Bankers defend charges

VICTORIA FALLS - Bankers Association of Zimbabwe (Baz) president George Guvamatanga has defended the prevailing bank charges saying they were a mere symptom of the operational challenges in the country.

This comes after Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono recently said government was considering legislating bank charges to protect depositors who are  being charged as much as  50 percent interest on loans per annum $40 per withdrawal.

Speaking at the Zimbabwe High-level Economic Forum in Victoria Falls on Wednesday, Guvamatanga said the country had a high risk premium, due to high non-performing loans, which drives the cost of capital upwards and bankers are seeking common ground with government to establish benchmarks for bank charges in a manner that does not threaten their operations.

“This is a broader reflection of the environment that we have in this country and we cannot then try to find a solution which destroys the banks,” he said.

“We need to address other structural issues to say why are companies non-performing in Zimbabwe not the symptom. Companies are non-performing in this country because we do have structural instruments, shortages of power, high cost of labour,” added Guvamatanga.

The Baz president said there was need to align interest rates, both on deposits and loans, with the level of non-performing loans, which newly-appointed Reserve Bank of Zimbabwe (RBZ) deputy governor Khupikile Mlambo said stands at 12,2 percent.

“We should be able to figure out alignment on saying there is no one who is able to provide services for free, so banks cannot provide free services” he said.

Speaking on the proposed legislation to gazette interest rates, Guvamatanga said, “As Baz we don’t believe legislation is the way to go because if we legislate and it is no longer viable we stop providing the service because it’s no longer a viable business,” adding Zimbabwe’s cost of raising money was high.

“If we are just to give an example, if we are calling out to legislate rates at 10 percent what we are simply calling for is that banks should stop going to developmental financing institutions to seek financing and lending to the market because it will no longer be viable for banks to lend at that legislated rate,” the Baz president said.

“Because anyone going to Afrexim bank today, to use them as an example, is accessing lines at eight percent and that’s the cost of accessing long-term financing that we are looking for in this market because deposits are short-term in nature and do not support long-terms facilities.”

Currently, Guvamatanda said, Zimbabwe is only able to get long-term financing through third-party financing institutions who on average are providing funding to Zimbabwe at 10 percent.

“Over and above that we now have to add our own administration fee which is around two percent and we are already talking 12 percent. If we are to add the risk premium of 12,2 percent, a number coming from the deputy governor, we are already talking of 25 percent.”

What it means, the Baz president said, is that if banks lend at 10 percent they face a two percent shortfall.

Recently, Gono said banks were recording high levels of non-interest income, an indication they were struggling and surviving on ripping off depositors, but Guvamatanga said in some cases it’s just an indication banks are adopting international trends of growing non funded income.

“The global trend, now if we want to build strong financial institutions, is to actually grow non-funded income because interest income is volatile in nature.

“Sources of non-funded income are quite wide and they include insurance, mortgage financing, investment services,” said Guvamatanga.

“That’s why banks are now providing Internet banking, mobile banking to try and increase that portion of income and I think we should actually be encouraging that.

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