DOMESTIC banks in Zimbabwe are generating substantial revenue through over 300 charges imposed on consumers, further eroding trust in the sector.
This situation exacerbates an already strained market burdened by high taxes, prompting many consumers to avoid formal banking altogether.
Documents from a leading bank reveal that it has more than 312 revenue lines, most of which are customer charges.
These include real-time gross settlement fees, internal funds transfer fees, bill payment fees, establishment fees, bank statement fees, balance inquiry fees, account maintenance fees, point-of-sale and card fees, local debit card fees, VISA and prepaid card fees, MasterCard debit and prepaid card charges, local credit card fees, and cash withdrawal fees, among others.
The fees and charges range from 1% to 25%, affecting both corporate and individual clients in United States dollars and Zimbabwe Gold (ZiG).
Non-interest income charges are particularly steep, ranging from 12% to 25%. Monthly account service fees apply, with individuals charged 4,5% and corporates 25%.
National Social Security Authority (Nssa) pensioners are levied 1% or ZiG 13 per transaction.
Small and medium enterprise loans, as well as mortgage interest, attract charges of up to 25%.
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Overdraft fees on individual loans can reach up to 5% in US dollars and 8% in local currency per month.
Internal transfers incur charges between 1% and 1,5% for local currency, while other currencies attract charges of up to US$200 per transaction.
Zimswitch Instant Payment Interchange Technology transfers cost between 1,5% and 2%. Notably, cash deposits are the only service offered for free by the banks.
Reserve Bank of Zimbabwe (RBZ) deputy governor Innocent Matshe told the Zimbabwe Independent that the central bank was working with the Bankers Association of Zimbabwe (BAZ) to review these charges
“You may remember that the Reserve Bank announced that it was working with financial institutions to have banks issue no-frills accounts,” he said.
“And what no-frills account means is that there are no-frills, so no charges. So, we are working with BAZ to make sure that these bank charges make sense.
“We are consulting with the financial services sector on charges, even as we have helped work out this no-frills account.
“But we still feel there is room for the financial services sector to rationalise their charges and to reduce the percentage of their income that comes from fees and service charges.
“So, we are still in the consultative phase of that and we hope that we will have a solution very soon. Hopefully (we will achieve this) either before or just after the next monetary policy statement,” he added.
No-frills accounts require an individual to maintain a negligible or no minimum balance and follow simple know-your-customer norms.
On interest rates, Matshe said they were working to make sure fundamentals determine the rates.
During a panel discussion at the 2024 Institute of Chartered Accountants of Zimbabwe Winter School in Victoria Falls, Finance, Economic Development and Investment Promotion deputy minister David Mnangagwa said indicated that directives on bank charges might be issued.
“Right now we are saying let us engage,” he said.
“We leave it with the monetary authorities but the clock is ticking on the issue of bank charges,” he said.
Questions sent to BAZ were not responded to by the time of going to print.
However, BAZ chief executive officer Fanwell Mutogo told our sister paper NewsDay recently that banks, like any other industry, incurred costs when providing a service to their clients.
“Some of the costs are but not limited to the following: operational and capital costs from service providers; licence fees for core banking systems which are charged based on the number of accounts; software maintenance costs; cost of repatriating currency. The banking sector is prone to price volatilities in the operating environment and, therefore, in our pricing there is an element of cost-push pricing,” Mutogo said.
“Our drive is to try (to) promote products/accounts which do not incur charges such as the no frills.”
High banking fees are one of the main reasons why informal players avoid banks.
Public confidence in the banking system is low, with many fearing that once banked, they will not be able to access their funds easily
