But mo­bile money of­fers hope, if all play­ers work to­gether, writes Ray Ndlovu

Financial Mail - Investors Monthly - - Contents - In­vestors Monthly,

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


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