Zim banks vie for deposits as government battles for funding

During the crisis, depositors failed to withdraw their money from banks, and often had to endure long queues at banking halls to get their money.

Now, banking institutions are bombarding television viewers and newspaper readers with glossy advertisements with a raft of promises aimed at winning back depositors' confidence.

NMB Bank is promising to give each of its customers a “personal relationship manager”. “What more do you need?” an advertisement by the bank, asks, rhetorically.

Aware of the despondency created by the cash crisis, the bank promises to open “doors to a world of convenience”.

ZB Bank's own campaign is anchored around a promise to delivery service, while CFX Bank, with a multiple campaign aimed at individuals and the business community, is parading itself as “an active bank geared to develop solutions” to customers' complex business needs.

Metropolitan Bank, the smallest of the 14 commercial banks, has come up with a witty message: “The bank that satisfies” – with equal opportunity and service without favouritism, quick turnaround for customers' immediate needs and a fast-growing branch and ATM network.

Carrot and stick

Barclays Bank is encouraging its customers to maintain a minimum balance of $100 million in their savings accounts and stand the chance of winning a ticket to the Barclays Dubai Open Tennis Championship.

The campaign is currently running on national television and radio, but would hit newspaper pages a few days before the championships kick off on February 25, an official with the bank's marketing department says.

The championships will end on March 8, 2008, and the winner has been promised the chance to sit close to international tennis icons like Serena Williams.

CBZ Bank has also launched a “mega savings promotion” under which customers who keep a minimum balance of $10 million in their accounts for a month would stand a chance to win money (Z$750 million for the winner) and other prizes under the promotion.

Other banks are planning to launch campaigns soon, with at least three of them expected to give houses to winning clients.

However, Barclays Bank isn't just hoping for the magic of its Dubai Tennis Championship prize. It introduced minimum balances for all classes of accounts with effect from February 1, 2008, and had advised customers that all accounts below the minimum balances would be charged service fees and credit interest would not be paid. Even the zero balance current accounts have to be kept with a bit of cash, the bank says.

Minister concerned

The banks are apparently under pressure from the government to rebuild confidence and woo deposits.

Recently, the Minister of Finance Samuel Mumbengegwi told bankers they were “killing savings culture” by imposing exorbitant bank charges and paying paltry interest on deposits. He said foreign investors were unresponsive to government pleas to invest in the country because of low interest rates.

“What is there to lure them when to invest in the country when even the local people have no confidence in their own banking sector?” Mumbengegwi asked.

National savings are currently estimated at 10% of gross domestic product (GDP), when ideally this should be at 60% to stimulate growth.

Government the major victim

High domestic savings are a prerequisite for investments and sustained economic growth.

John Robertson, an independent economic consultant, says the government has been the major victim of the poor savings culture and “the victim of its poor economic policies,” Robertson said, pointing out the low interest rate regime being promoted by the government when inflation currently exceeds 26,000%*.

Government is currently the biggest borrower on the market, and had promoted low interest rates by fixing interest rates for Treasury bill instruments – its biggest instrument for domestic borrowing – at less than 400% to avoid choking itself under hefty interest charges. Additionally, it is getting at least 45% of depositors funds at 0% interest through statutory reserve payments.

For every dollar deposited into a bank account, the bank cedes 45% to the central bank for on lending to government.

This has limited the amount available to banks for lending, forcing them to charge hefty service fees and pay paltry interest on deposits to survive.

Low national savings meant that government had very little resources to fund its budget deficits, Robertson said, maintaining that this affects both domestic and foreign investment.

Moreover, foreign investors consider savings levels in a country to determine whether a target market can afford its products.

A bank economist who declined to be named said banks were not making much of their money from traditional lending business under the present hyperinflationary environment.

The size of the financial sector, he said, had been reduced since the ratio of deposits to GDP had fallen. Banks were therefore exploring ways of managing revenue.

“They are under pressure to increase revenue streams,” he says, and still under pressure from a government desperate for the depositor's dollar.

* Latest: The Zimbabwe inflation rate has just hit a record 66,213.3%