But mobile money offers hope, if all players work together, writes Ray Ndlovu
Zimbabwe’s fragile banking sector seeks a boost
Monetary authorities in Zimbabwe — already facing public resistance to bond coins introduced last December, a liquidity crunch and rumours of the return of the Zimbabwean dollar — are under pressure to restore confidence to its fragile banking sector, where a second bank has closed this year.
The instability of the banking sector further entrenches the fear that ordinary Zimbabweans have of keeping large sums of money in banks. Overnight, depositors in the past lost their savings because of bank collapses; hyper-inflation; or the adoption, as in February 2009, of the US dollar as the currency of choice against the Zimbabwe dollar.
The closure last month of AfrAsia Bank Zimbabwe Ltd formerly known as Kingdom Bank — a 1990s pioneer in indigenously owned banks — adds another instalment in the long history of bank closures.
In January, Allied Bank, which was owned by Transport Minister Obert Mpofu, surrendered its licence to the Reserve Bank of Zimbabwe (RBZ).
According to the central bank, the country has 15 operational commercial banks; a figure which analysts said was high and must “downsize further” to match economic activity.
Though deposits in banks have been growing in the past two years, industry executives admit it’s far from smooth sailing.
Official reports from the Bankers Association of Zimbabwe indicate that at the end of 2013, deposits were around $3,93bn and grew 12% to $4,4bn in the same period last year. This is dwarfed by the estimated $7,4bn in circulation in the informal sector that mobile money transfer agencies are also keen to tap into.
“Banking sector deposits have grown steadily throughout 2014, albeit at a slower pace than when the multicurrency system was first introduced,” said Willard Zireva, board chairman at MBCA, the Zimbabwe unit of SA’s Nedbank. “Deposits have remained largely short term and transitory and concentrated in a few large banks.”
A report by the Industrial Psychology Consultants released last year said Zimbabweans favour international banks to handle their funds. SA’s Standard Bank unit in Zimbabwe, Stanbic and the British-owned Standard Chartered and Barclays banks were rated as the most favoured international banks by the report. “Only 24% of customers wanted to stay with their current banks.”
James Benoit, AfrAsia Bank Ltd’s (ABL) CE, said the difficulties its operations in Zimbabwe had faced arose primarily from legacy issues within the bank and the difficult economic environment. “Zimbabwe has been going through an economic slowdown due to liquidity challenges and a fragile global financial environment,” Benoit said.
Nigel Chanakira, the founder of Kingdom Bank who left in 2013 when it changed hands to ABL, said the bank’s collapse would inevitably result in a high casualty rate. “Such unfortunate events come with a lot of losses. Clients will lose money and workers will lose their jobs. The confidence depositors had in our banking system is destroyed by such occurrences.”
Economic commentators said the slump in the banking sector was not only caused by low economic activity, but was also driven by the scaring away of foreign investors by the 51% indigenisation law. The irony appears lost on Robert Mugabe’s Zanu-PF as it pushes for the implementation of the law, when indigenously owned banks fail.
But monetary authorities appear poised to provide indigenous solutions to the crisis, with the central bank set to release $5m worth of bond coins at the end of this month.
John Robertson, an independent economic commentator based in Harare, said the bond coins were a piecemeal solution offered by the RBZ and was only aimed at convenience rather than addressing the challenges of money supply and stagnation.
Still, John Mangudya, the RBZ chief, said the bond coins would help correct the high price regime. Hope for recovery in the banking sector appears to lie in the mushrooming of mobile banking services.
EcoCash, a mobile money transfer service owned by Econet Wireless Zimbabwe, the largest telecoms operator in Zimbabwe, has taken the lead. It has made its mark in the financial services sector and since 2011 has handled over $1bn in transactions. But the rapid growth of mobile banking services has been challenging, and animosity between the banks and EcoCash has been fierce. Banks’ fears are that the harnessing of technology by EcoCash could sound the death knell of their operations.
“Mobile banking does give challenges to the big banks,” Robertson said, “… but they [mobile transfer providers] do not offer a comprehensive form of banking ... they may make money, but it’s through short-term deposits and the profit they make from there. They are still functioning in a narrow field and are not involved in lending, which is key to the recovery of manufacturing and business.”
In an e-mailed response to queries from Econet Wireless said its EcoCash product was launched to address many deficiencies in the market.
“These include the need for financial inclusion, which we continue to address through lowering the barriers of entry into the formal financial market for ordinary people via various innovations. EcoCash has successfully addressed critical needs in the market, such as the need for affordable and safe money transfer, savings and small loans and others. These are needs that Econet continues to work towards addressing through the services now available on the EcoCash platform.”
The telecoms giant conceded that though EcoCash had led the revolution in financial services, the vast opportunities remaining in the market would be better taken up if all players in the economy, including banks, were in good health.
Mobile banking does give challenges to the big banks