Fresh push for banks to pay interest

GOVERNMENT says it is scaling up confidence-building measures to boost deposits into the country's banking sector.

Giving a keynote address during last night's 22nd edition of the Banks and Banking Survey, which was held virtually, Finance ministry permanent secretary George Guvamatanga said the process commenced with moves to introduce payment of interest on electronics balances.

Zimbabwe's banking sector has paid the price of waning market confidence since the 2004/2005 financial crisis when operators collapsed under the weight of a corporate governance rot and financial mismanagement that triggered a depositor flight.

But Reserve Bank of Zimbabwe (RBZ) governor John Mangudya has significantly stabilised the sector since coming into office in 2013. However, confidence continues to be hammered by operators' reluctance to pay interest on deposits, while charging punitive fees and commissions.

In August, the RBZ chief encouraged banks to pay interests on deposits, after negotiations with the Bankers Association of Zimbabwe (BAZ). Guvamatanga yesterday said at the survey award ceremony sponsored by First Capital Bank Zimbabwe (FCB) the government was determined to restore confidence in the sector.

"Government on its part is introducing policies to promote confidence in the financial sector such as the payment of interest on electronic balances, including those on mobile platforms, enhancing the operation of the Deposit Protection Corporation (DPC), among others," he said.

"The depositors' protection scheme has inspired confidence greatly as small depositors, who usually suffer the consequences of a bank failure, have been guaranteed protection by the existence of the scheme.

"Nonetheless, I also notice some of the challenges which need to be addressed, including gender equity on most boards."

Guvamatanga's declaration that digitalisation is the future of the sector dovetailed into the theme of this year's survey theme, "Adapting to Market Disruption Through Digitalisation". While the outbreak of Covid-19 has brought challenges to the sector, the permanent secretary said it had also unlocked opportunities for banks.

"To achieve this, the need for investment in Information Communication Technology market infrastructure cannot be overemphasised. You have already witnessed that most banks have grown digitally with most services now available on e-services, improving convenience and accessibility of banking services. Business disruptions which included job losses in the banking sector resulted in business being conducted virtually leading to the closure of many bank branches," Guvamatanga added.

He said while digitalisation represented the future of the banking sector, mergers by sector players would allow them to develop critical mass and take advantage of economies of scale. AMB Capital Limited executive director, Zenzo Lusengo, who was guest of honour at the awards ceremony, concurred that the pandemic could be a catalyst for the development of new banking sector products that unlock fresh opportunities.

"As someone with an innate curiosity, the hunger to explore new ventures and who appreciates the importance of reinvention, an interest question would be where I see opportunities in banking and financial sectors going forward: digital only banks — in South Africa we have seen new banks emerging like Discovery Bank, Tyme Bank and Bank Zero, in particular," he said.

Lusengo added that in any disruption, "upstarts often end up eating the incumbent's lunch, if the incumbents let them do so".

FCB managing director Ciaran McSharry said while digitalisation brings significant progress within the banking sector, the downside to it is increased cyber security risks.

"We encourage everyone to use digital channels in a safe manner and to understand how they operate. Internally we have enhanced our security by partnering with Visa to bring the Visa 3D to secure functionality for all online payments," he said.

"We have also embarked on a customer education journey on our digital channels across diverse platforms to ensure they have knowledge of our platforms. Our aim is to do what we can to protect our customers funds."

McSharry said the new normal characterised by digital solutions has become a reality.

Zimbabwe Independent editor Faith Zaba said despite: "Despite the headwinds stemming out of the Covid–19 pandemic, and disruptions to operations that have been brought by the rapid shift to digital platforms, the future appears bright as Zimbabwe banks continue to innovate and accelerate their digital transformation.

"I have no doubt in the ability of our banking industry to overcome, having seen how they emerged out of previous turbulences. As has already been said, this year's Banks & Banking Sector Survey has demonstrated how important it has become for economies to adapt to the "new normal", and how banks are rolling out digitalisation and other innovations to make the banking experience easy and profitable."