HIGH MINIMUM BALANCES BAD FOR BANKS
HIGH minimum balances being imposed on customers by commercial banks have continued to be a hindrance to the uptake of financial access in Zambia, says Kenyan former Bank governor, Njuguna Ndung’u.
Dr. Ndung’u emphasized that high minimum balances had pushed customers away from holding bank accounts.
“Banks do not need to have minimum balances as they have ledger fees 24/7. Banks need deposits to grow their intermediation capacity, lower costs and lower barriers to entry,” Dr. Ndung’u said.
He was speaking yesterday at a press briefing in Lusaka hosted by the Financial Sector Deepening Zambia (FSDZ).
Dr. Ndung’u said in the case of Zambia, lack of a deposit insurance bill other than high balance fees also posed as a challenge for broadening financial inclusion as borrowers did not feel protected.
“Some of the barriers to entry into the banking system include introduction to the bank existing account holders, cost of maintaining accounts and restriction on withdraw from saving accounts,” he said.
And Dr. Ndung’u said the future of the banking sector in Zambia and Africa at large lies in Digital Financial Services (DFS). He explained that DFS had the pontential to support Small and Medium Enterprises (SMEs) and households.
Dr. Ndung’u also said DFS has supported the banking sector with an effective technological platform to manage micro accounts.
He further said they also allowed for the development of an effective and forward looking monetary policy.
Meanwhile, FSDZ chief executive officer, Betty Wilkinson said mobile payments technology was becoming increasingly significant especially the context of economies where many low income households and microenterprises do not have ready access to financial services.
“Mobile payment facilitates financial inclusion and offers potential for financial integration,” she said.