The Governor of the Reserve Bank of Zimbabwe (RBZ), Dr. John Mushayavanhu, has called on banks to transition from fee-based revenue models to traditional lending approaches. He warned that reliance on high fees and commissions could result in banks being outperformed by more efficient competitors.
Typically, banks derive most of their income from funded sources, yet current data shows that a staggering 80% of their revenue comes from non-funded income. In a recent podcast interview with ZTN Prime in Harare, Dr. Mushayavanhu emphasized, “The central bank is collaborating with banks to ensure they return to their core function: lending money.”
As the banking sector increasingly embraces digitalization, he noted that the costs associated with account maintenance and transactions are likely to decrease. Dr. Mushayavanhu highlighted that failure to adapt could lead banks to lose market share to more agile players.
He further pointed out that large corporations often negotiate better interest rates with banks, leveraging their substantial deposit holdings. The imposition of high bank charges and a reluctance to offer interest on deposits has been a significant deterrent for individuals looking to save, ultimately harming the national savings culture and, in some cases, erasing entire deposit balances.
Economic analyst Mr. Carlos Tadya remarked, “The absence of interest on deposits, combined with steep charges, creates an unfavorable climate for savers,” stressing the impact on long-term capital formation. He called for a thorough reassessment of the banking sector’s role in fostering savings and investment, advocating for policy measures that incentivize savings and safeguard depositor interests.
Analysis from the central bank indicates a heavy reliance on non-interest income, which accounted for approximately 87.57% of the sector’s total income in the first half of 2024. Key contributors to this non-interest income included net gains from the revaluation of foreign currency assets and investment properties. While these gains enhance profitability, the sector’s heavy dependency on non-funded income raises concerns regarding long-term viability.
The RBZ cautioned that fluctuations in foreign exchange rates and property values could introduce volatility into earnings. A more diversified income structure that increases the share of interest income from lending activities could bolster the sector’s resilience and stability.
Dr. Mushayavanhu also noted that the stability of the Zimbabwean Dollar (ZiG) in both official and parallel markets should boost confidence and encourage individuals to deposit their funds in banks.
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