Reserve Bank of Zimbabwe Governor Dr. John Mushayavanhu asked banks to move away from fee-based income toward traditional lending approaches. He warned that continuing to charge high fees and commissions might cause banks to lose market share to more efficient competitors. Traditional banking relies on funded income as the main revenue source, yet current data shows banks earn about 80 percent of their money from non-funded sources.
Dr. Mushayavanhu explained during a recent podcast interview with ZTN Prime in Harare that the central bank encourages banks to return to their fundamental purpose of lending money. He noted that as banking becomes more digital, account maintenance and transaction costs should decrease naturally. The market presents clear challenges - banks must adapt or risk replacement by more efficient financial service providers.
The Governor mentioned that larger businesses can often secure better interest rates from their banks by leveraging their substantial deposit amounts. Financial experts have identified excessive bank charges combined with low-interest payments on deposits as major factors that discourage people from saving money. These practices have damaged the country's savings culture and sometimes eliminated account balances through fees.
Economic analyst Carlos Tadya described how zero interest on deposits plus high service charges creates an unfriendly environment for people trying to save money. This situation threatens long-term capital growth across Zimbabwe. Tadya believes the banking industry needs a complete examination of how it supports saving and investment activities, suggesting new policies must protect depositors and encourage saving habits.
Central bank analysis revealed that banks heavily depend on non-interest income, which made up 87.57 percent of total banking sector revenue during the first half of 2024. Most of this non-interest income came from currency exchange gains and property investments. These sources temporarily boosted profits but raised concerns about sustainable business models. The RBZ notes that relying on foreign exchange rates and property values introduces unpredictable elements into bank earnings.
Dr. Mushayavanhu believes a more balanced income structure with greater emphasis on interest earnings from loans would strengthen banking sector stability. He pointed out that the stability of the ZiG currency on both official and alternative markets should build public confidence. This stability may encourage more citizens to place their money into bank accounts rather than keeping cash outside the formal banking system.
Dr. Mushayavanhu explained during a recent podcast interview with ZTN Prime in Harare that the central bank encourages banks to return to their fundamental purpose of lending money. He noted that as banking becomes more digital, account maintenance and transaction costs should decrease naturally. The market presents clear challenges - banks must adapt or risk replacement by more efficient financial service providers.
The Governor mentioned that larger businesses can often secure better interest rates from their banks by leveraging their substantial deposit amounts. Financial experts have identified excessive bank charges combined with low-interest payments on deposits as major factors that discourage people from saving money. These practices have damaged the country's savings culture and sometimes eliminated account balances through fees.
Economic analyst Carlos Tadya described how zero interest on deposits plus high service charges creates an unfriendly environment for people trying to save money. This situation threatens long-term capital growth across Zimbabwe. Tadya believes the banking industry needs a complete examination of how it supports saving and investment activities, suggesting new policies must protect depositors and encourage saving habits.
Central bank analysis revealed that banks heavily depend on non-interest income, which made up 87.57 percent of total banking sector revenue during the first half of 2024. Most of this non-interest income came from currency exchange gains and property investments. These sources temporarily boosted profits but raised concerns about sustainable business models. The RBZ notes that relying on foreign exchange rates and property values introduces unpredictable elements into bank earnings.
Dr. Mushayavanhu believes a more balanced income structure with greater emphasis on interest earnings from loans would strengthen banking sector stability. He pointed out that the stability of the ZiG currency on both official and alternative markets should build public confidence. This stability may encourage more citizens to place their money into bank accounts rather than keeping cash outside the formal banking system.
