Business / Economy
'Zimbabwe's banking model archaic'
07 Apr 2014 at 08:45hrs | Views
Central bank deputy governor Kupukile Mlambo says the country's banking system is outdated and called on the sector to embrace new technology.
Mlambo castigated the banking model in use as traditional and very old.
"Banks are using the old way of banking, which is the brick and motor system. They should embrace new technology and banks should not rely on bank charges to make money, they should make their profit from other means.
"I was shocked when some banks wrote in their financial statements that they made a loss or a small profit because of the Memorandum of Understanding (MOU) signed between the RBZ and Bankers Association of Zimbabwe (BAZ) which capped interest charges, but should banks make money out of charging interest rates?" he questioned.
All banks have heaped blame on the MOU between the central bank and BAZ for playing a huge part in their losses or decline in profits.
Mlambo also said there were too many banks, which were not proportion with the population.
"We have too many banks in Zimbabwe, about 21 banks and a population of 13 million. Why not merge them or consolidate them, or create agency that will stand in for the banks not to have three branches on
one growth point that's costly and not profitable.
"Efficiency levels are too low, some are banks solvent but very fragile. The banks ability to withstand a shock is very low, if we have a huge liquidity crunch, the indigenous banks cannot withstand the shock," he observed.
Notwithstanding, Mlambo's remarks, traditional banking remains the hallmark of banking where banks lend and charge interest. This banking model is still vibrant even in the developed world.
The central bank's second in command said it was wrong for banks to equate buildings they own to liquidity.
"We can't do away with brick and motor per se but we should have agencies taking over that role. We use the economies of scale, cut down costs and banks should consolidate," he added.
Mlambo said part of the problem faced by the banking sector stemmed chiefly from the stripping away of the regulatory institution‘s lender of last resort function.
"When the economy was dollarised, that decision was a market driven decision but we lost one of our major function. We are not capitalised and we cannot support inter market," he said.
Mlambo castigated the banking model in use as traditional and very old.
"Banks are using the old way of banking, which is the brick and motor system. They should embrace new technology and banks should not rely on bank charges to make money, they should make their profit from other means.
"I was shocked when some banks wrote in their financial statements that they made a loss or a small profit because of the Memorandum of Understanding (MOU) signed between the RBZ and Bankers Association of Zimbabwe (BAZ) which capped interest charges, but should banks make money out of charging interest rates?" he questioned.
All banks have heaped blame on the MOU between the central bank and BAZ for playing a huge part in their losses or decline in profits.
Mlambo also said there were too many banks, which were not proportion with the population.
one growth point that's costly and not profitable.
"Efficiency levels are too low, some are banks solvent but very fragile. The banks ability to withstand a shock is very low, if we have a huge liquidity crunch, the indigenous banks cannot withstand the shock," he observed.
Notwithstanding, Mlambo's remarks, traditional banking remains the hallmark of banking where banks lend and charge interest. This banking model is still vibrant even in the developed world.
The central bank's second in command said it was wrong for banks to equate buildings they own to liquidity.
"We can't do away with brick and motor per se but we should have agencies taking over that role. We use the economies of scale, cut down costs and banks should consolidate," he added.
Mlambo said part of the problem faced by the banking sector stemmed chiefly from the stripping away of the regulatory institution‘s lender of last resort function.
"When the economy was dollarised, that decision was a market driven decision but we lost one of our major function. We are not capitalised and we cannot support inter market," he said.
Source - Zim Mail
