Indicated by substantial profits, last year was a prosperous year for all banks in Zimbabwe. Cautious but shrewd lending among other factors has contributed for banks to post these profits. However, the overall banking sector is decreasing its lending to households.
From 2016 up to now Zimbabwe is grappling with cash shortages and the cash shortages have come with unintended consequences that have seen bank’s non-interest income surging. Non-interest income is income earned by banks from the fees they charge and commissions. The fees range from transaction fees, insufficient funds fees, monthly service charge fees etc.
Ecobank, CBZ, Standard Chartered to name but a few have all registered rising non-interest incomes. The increase in non-interest income which is contributing to the rise of profit margins to many of these banks is giving them a reason for celebrating the current cash crisis.
Why is non-Interest Income rising?
The shortage of bond notes and foreign currency to make transactions is stirring people to increase the use of banking channels in transacting. For example, before the cash crisis people used to withdraw all their money as soon as it was credited to their bank account and henceforth they would make all purchases with cash.
Consequently, banks could only earn non-interest income from a single transaction.
But since the advent of cash shortages, people are finding it hard to make cash withdrawals. As a result, they are having to make all their transactions using the banking channels. This, in turn, is increasing the number of fees and commisions charged by banks as customers use banking services relatively more to the pre-cash crisis period. And more fees and commisions means more income for banks.
Banks are now having more channels to earn non-interest income but the growing use of mobile money services like Ecocash, Telecash, and OneMoney, owing to their convenience and comparatively lower fees, is migrating a substantial amount of non-interest income from the former to the latter.
So whilst banks are loving the cash crisis, they are frustrated by mobile money services platforms in their bid to maximize fees and commissions. The rising integration of banking platforms and mobile money platforms could mean that banks now want to maximise non-interest income by partaking in non-interest income accumulated through the use of mobile money platforms.
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8 comments
Banks loving the cash crisis? it is unfortunate that you dont understand banking at all. Banks are not NGOs – services that are offered by banks cost the banks a lot of money. the infrastructure that is in place ranges into millions for a client to have that basic service delivered. How can banks enjoy a crisis. look at the bigger picture. Industry is not ticking and the consumptive borrowing was about to sink the banking sector( thank God for ZAMCO).
your platform should be educative not negative as portrayed in the article above. Banking is a confidence game and unfortunately you are doing the negative with such articles. Write about Harry Porter if you are not informed of such critical issues.
Zimbabwean banks are profiteering at our expense bro while providing shoddy services. They treat clients with disrespect and it’s like a sin to have an account. Having a bank account in this country is a liability and not an advantage. You leave your money in the account and it evaporates like spirit from outrageous charges.
You talk of confidence, there’s no confidence on the Zim banking sector look at our history, once beaten twice shy. I agree with the writer the most local banks are enjoying the cash crisis gleefully as it is lining up their profits. If they had their clients at heart they would make their charges affordable and support the usage of plastic money in a all win fashion.
But facts are that Bank profits have just been on an upward trajectory & noone is happy with bank service😎
Spot on – about time somebody told it like it is. Providing services like withdrawals is NOT A BUSINESS – it’s ransoming your money because you have no choice if your salary is deposited into an account. That’s why those charges should always be at cost. Plus money has a time value. The basic principle is that If you hold my money for any amount of time, it could be earning something. That’s why there is a thing called INTEREST. These guys are holding our money but then charging us for that??? It’s criminal.
This story seems to be written by somebody with only a primary school education, and seems to be targeted at an audience with the same basic education.
Zamco bailed you out… How about giving back those profit to square off the debt you shifted off to zamco… Someone and not the gvt of Zimbabwe has to pay it… Secondly I was forced to open a bank account.I just want my money and don’t need your so called services…I bank with Barclays and I just transfer to ecocash which is a much cheaper and real time service unlike rtgs and be done with your daylight robbery… I actually lose money with you… There’s no incentive at all to keep it there. Honestly even in the UK I used to pay with cash
By the way those services that you claim I need…are extremely sub par….pathetic… The staff look at you like a criminal…it takes ages to get a card and charges are ludicrous. Work on your horrible customer service… Pay off debts to zamco. You making a profit now what’s the excuse
In 2008 balances were zeroed… This is our second rodeo… You downsizing… Yet your tariffs remain the same… You make profits yet zamco has bailed you out…I had a corporate account and I was charged 30 a month plus a swipe fee plus an internet banking fee… Interesting thing is on corporate accounts the first 30 transactions are free …there after the more transactions you do the more you are charged up to a max of 90… All my swipes pushed to 90 month on top of those other charges… When I was doing my accounts I was paying a ridiculous approx 140 a month…I simply dumped them and introduced ecocash… I’m paying far far less… It’s about time gvt looked into the zamco debt and started asking for the money