Chinamasa raps outmoded banks

HARARE - Finance minister Patrick Chinamasa says local banks are losing depositors to mobile money platforms due to their failure to come up with innovative products to meet consumers’ changing needs.

Chinamasa told delegates in the capital yesterday at a workshop on findings of a survey done by the FinMark Trust in conjunction with the Centre of Financial Regulation and Inclusion (CFRI) that commercial banks were not adapting to changes in the financial sector.

“Commercial banks are acting like an ostrich with its head in the sand, and not adapting to the changing dynamics in the sector. I have urged them to be innovative for their own survival, but I am yet to see any effort,” he said.

The Treasury chief noted that local banks were getting most of their revenues from non-interest based income as they were not lending.

“This reliance on bank charges and not interest is very worrying. But they are not acting on it which is sad because a nation cannot develop without banks. They are the ones who bring in the money at the end of the day,” he said.

Chinamasa’s remarks come after the CFRI survey uncovered that banks’ contribution to financial inclusion in Zimbabwe has sharply declined in the past two years and the sector was in need of business model changes to regain ground.

The study also established that mobile money platforms now dominated the financial inclusion landscape, in the wake of declining income and employment which has in turn depressed the use of formal financial services.

According to CFRI, the average income demographic information decreased from $143 in 2011 to $134 in 2014, which has also further affected banks — as consumers have shunned the system on the back of high banking charges.

Transactions processed by banks in September 2015 decreased by 12 percent to $3,5 billion from $3,9 billion recorded prior comparable period, however, mobile-based transactions surged eight percent to $5,2 billion during the same period, according to central bank data.

A FinScope Consumer Survey of 2014 shows the proportion of the population accessing formal financial services increased from 38 percent in 2011 to 69 percent in 2014 largely as a result of mobile financial services that have become a key delivery vehicle of financial inclusion.

The role of the bank has been challenged by mobile money alternatives, thus financial service providers and service deliverers seeking payment convenience for their clients are now tailoring their solutions to incorporate mobile money, something which has seen online payments also taping on mobile money options.

The same shift has also been taking place around card payment options. Options like debit cards that have a mobile money base like the alternatives from Econet and Telecel all represent this shift.

Mobile money remittances in Sub-Saharan Africa are projected to reach $33 billion in 2015 as the services are growing above six percent in more than three countries with increasing mobile connectivity, according to WorldRemit, a United Kingdom-based online service company that lets people send money to friends and family in other countries.

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