High bank charges frustrate depositors

High charges levied by Zimbabwean banks on both local currency and foreign currency accounts (FCAs) are frustrating depositors, who have since accused the financial institutions of ripping them off at a time when they are reeling from the effects of the Covid-19 pandemic.

Recently released financial results for banks indicate that the larger chunk of their income is derived from service charges as opposed to interest on loans.

“Look at the bank results and look at what they give deposits. I don’t think moral suasion is going to do it but in my viewpoint it’s ridiculous. I am globally exposed and have never seen charges this high,”

Chanakira was speaking recently at the African Forum and Network on Debt and Development (ARODAD) and Zimbabwe Coalition on Debt and Development (ZIMCODD) annual multi-stakeholder debt conference in Harare.

He said high charges were discouraging those with forex currency from banking, adding making profits out of charges is not the proper way to do banking.

This comes at a time when some banks such as Stanbic have announced a review of tariffs with effect from next month.

Bulawayo businessman, Golden Muoni said Zimbabwean bank charges have always been exorbitant, adding citizens were now feeling the pinch because of Covid-19.

“Long back, the old banking which I know was that when I leave the money in the bank, it must get interest but today if you leave your money at the bank, come after three to five months you will be owing the bank in whatever currency. Whether you have deposited the money in US Dollars, the bank will phone you to say you owe money.”

He said it was unfortunate that Zimbabweans are funding lifestyles of bank executives at their own expense as with bank deposits not benefiting them at all at a time when the culture of saving has since been eroded.

“The banks are just ripping off people, they are taking money from people. Again if you look at the interests that are charged I think they range between 60 to 65 percent per annum. What kind of interest rates are those?”

Economist Dumisani Sibanda said owing to economic challenges banks are no longer doing their core business of lending money, hence the exorbitant charges.   

“Banks are obviously risk-averse and not lending as much as they should,” said Sibanda. “This could be due to risk associated with the weak performance of the economy and banks are cautious about lending. The loss of value of the local currency is contributing to the fear of lending.”

He added: “Banks are not involved in their core business which is to lend money. In the circumstances, they have resorted to high bank charges to compensate for low lending levels.”

Another economist at the National University of Science and Technology’s Department of Banking and Investment promotion described the current bank charges as “punitive.”

“They are too high, especially given that the interest rates are negative,” he said.

“Unfortunately the banks are taking advantage of the inelastic demand for their services by the customer. But this is reducing the value of their services and it is negatively affecting their Relation Capital which will affect their long term competitiveness.”

Dlamini said future disruptive technologies will come in to erode the oligopolistic tendencies of the banks which give them the monopoly power to overcharge consumers.

“Banks are paying little attention to the changes in the global financial landscape where new innovative technologies are fast rendering brick and mortar-deposit-taking institutions irrelevant,” he said.

He said the solution to high bank charges lies in the government issuing more licenses to deposit-taking Microfinance and Fintech companies.

“This will increase competition and reduce the cost of these transactions, especially in this Covid-19 era and Industrialization 4.0.”