Jail rogue bankers: Mugabe

HARARE - President Robert Mugabe has slammed the banking sector, accusing bankers of gambling with depositors’ funds and threatened that culprits should be jailed.

Mugabe said the “illicit” bankers violated depositors’ trust, a scenario that contributed to the current state of the economy and defeated the purpose of indigenisation.

“Bankers who gamble with depositor’s money deserve to go to jail,” he said.

“Hautambe njuga nemari isiri yako ukadyiwa njuga yacho woita sei? Wotoendesa mukadzika sepinyoro (You do not gamble with money that is not yours, what will happen if you lose the bet? You will end up pawning your wife). Such behaviour is unacceptable,” Mugabe said at the Economic Empowerment Conference held in Harare on Wednesday.

The veteran leader said the thrust to indigenise must be guided by dependability, adding that locals must not grab companies from foreigners and “then fail to fill in the shoes of the foreigners.”

“We have the capacity to start our own businesses, good business ethics are the foundation of any business practice. Indigenisation is not an excuse for poor business ethics,” Mugabe said.

One of the key contributors to Zimbabwe’s banking crisis has been owner-management, which has resulted in corporate governance weaknesses such as insider lending, abuse of depositors’ funds and speculative activities.

At the height of the banking crisis in 2003-2004’s, in just six months, 13 out of 25 financial institutions were placed under curatorship, liquidated or administered by the Reserve Bank of Zimbabwe through the Troubled Banks Fund.

Most Zimbabweans lost confidence in the financial services sector when their life time Zim-dollar savings were wiped out at the inception of the multiple currency system in 2009.

Experts have said that addressing the weaknesses within the sector would require a robust regulatory approach.

Mugabe’s swipe at the banks comes after Finance minister Tendai Biti announced key reforms in the banking sector in his 2013 national budget.

Biti barred banks from levying charges on deposits of $800 and below while he also ordered the institutions to pay a minimum four percent per annum interest on deposits of $1 000 and more held for at least 30 days. He also imposed a 10 percent cap on loan interest.

However, market players and analysts said the reforms are detrimental to the fragile and sensitive sector.

Kingdom Bank Limited (Kingdom) has argued that instead of encouraging financial inclusion, like Biti intended, the policies will have a reverse impact.

“…there will be no incentive for bankers to open accounts for low-income earners. This works against financial inclusion,” Kingdom said in its weekly market report.

Kingdom also warned that the reforms will force bankers to limit credit at interest rates that fall below their risk levels.

“Bankers remain accountable to depositors for funds received and take extreme risk in lending it in Zimbabwe, which naturally requires adequate compensation,” said Kingdom.

The institution said Biti should have worked with recommendations from industry “instead of prescribing rates and charges to banks. The free market should be allowed to operate.”

“The more banks begin to publicise their prices, the better bank clients will be able to exercise their own discretion and take their banking business to the cheapest bank.”

Eddie Cross, an economist and legislator has said, “I think this is dangerous. Our banking sector is highly competitive and I don’t see much evidence of collusion. We should leave the system to determine its own basis of trading and I don’t think this strong interference is healthy at all.”

James Wadi, BancABC chief economist, also said the removal of bank charges will hurt small banks.

“Prescribing a straight-jacket approach on scrapping bank charges for all deposits of $800 or less will disadvantage small banks that chose to serve the lower end of the market,” he said.

But, Biti is adamant. The Treasury chief said there will be no reverse on the new policies.


Post a comment

Readers are kindly requested to refrain from using abusive, vulgar, racist, tribalistic, sexist, discriminatory and hurtful language when posting their comments on the Daily News website.
Those who transgress this civilised etiquette will be barred from contributing to our online discussions.
- Editor

Your email address will not be shared.