Banks under increased scrutiny | Business Times

LIVINGSTONE MARUFU

 

Local banks have come under  increased scrutiny  after the Reserve Bank of Zimbabwe (RBZ) governor John Mangudya told the financial institutions to stop offering one-size-fits-all accounts and  instead  set up pay-as-you-go accounts for farmers and other people with sporadic incomes as part of efforts to encourage financial inclusion in the economy.

According to Mangudya, a lot of growers of grain and tobacco are closing their bank accounts when they discover that during the time they were dormant, their current accounts have accrued various charges and  fees.

Mangudya also voiced concern about the outrageous fees that banks impose.

Long-suffering depositors, who felt that the fees and charges banks were imposing were a bitter pill to swallow, have also been incensed by the sharp increase in service charges.

According to recent financial statements, the local financial institutions have prospered despite the fact that almost every other sector in the nation is on the verge of collapse due to a weak economy. This success has been attained by charging exorbitant fees and interest rates on loans and services to depositors who are particularly vulnerable.

“We are trying to promote financial inclusion and encourage the unbanked to start banking hence banks should enhance low-cost accounts that commensurate with the profile of different customers and to move away from the one-size fits all concept.

The banks should also re-model bank charges, for example,  pay- as -you- go low-cost accounts like mobile phones on airtime.

“We have the tobacco and maize growers  who  earn their proceeds seasonally between March and August and April and September respectively, hence those people should not be charged when they are not active.

“The banks should institute new measures that ensure these clients are not charged when they are not using their accounts to promote financial inclusion and encourage others to put their money in the formal channel. If we don’t do that we are shooting ourselves in the foot,” Mangudya  told Business Times.

Additionally, Mangudya, in the latest Monetary Policy Committee statement, said  more no-frills (low-cost) bank accounts   should be promoted  in order  to encourage  financial institutions to increase financial inclusion.

“This measure will promote more usage of banking services and financial products, including increased use of bank cards, digital financial services and other cash-lite means of payments in the economy,” Mangudya said.

Mangudya also suggested that the government take into consideration eliminating Intermediated Money Transfer Tax [IMTT] on transactions that are intermediated through plastic bank cards and other digital platforms in order to support efforts to formalize the economy and to encourage the use of non-cash-based means of payment in the economy.

The introduction of the 2% IMTT, according to the Zimbabwe National Chamber of Commerce (ZNCC), was intended to tax the untaxed informal sector.

ZNCC said  the  IMTT has overly taxed the formal taxpayers and businesses are incurring the IMTT even when paying tax dues to Zimbabwe Revenue Authority, thus it is a tax on tax.

Given the knock-on effects of bank fees on the willingness to use digital financial services, the promotion of inexpensive bank accounts is a positive move.

“If this step is to be taken, the IMTT should be removed altogether with the withdrawal levy and deposit fees including on high-cost bank accounts,” ZNCC said.

 

 

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