Government has admitted that local banks are charging exorbitant charges but it does not have the power to introduce and cap the charges and protect the ordinary citizens of Zimbabwe.
Speaking in Parliament last week, Deputy Minister of Finance Clemence Chiduwa explained that banks were charging high interest rates because most of them are importing solutions. These solutions include software services and other technology used in banks.
He added that the Ministry had engaged the Bankers Association of Zimbabwe (BAZ) to discuss measures on how to make sure banks get solutions locally.
“Thank you Mr. Speaker Sir. I would like to thank the Hon. Member for the question which is specifically asking about the high bank charges. I think this is an issue that we have been talking about in this Parliament. The bank charges that are being levied by our financial institutions are very high.
“Even if we look at the performance of our banks, above 84% of their profits comes from bank charges and we have engaged the banks and BAZ, and the major reason that they have given us is that most of their solutions are imported,” Chiduwa said.
“We have implored BAZ to say let us try to ensure that the solutions that we use in Zimbabwe are local solutions.
“At the moment we cannot direct them to reduce the bank charges but what we are saying is collectively as BAZ, they need to re-look at their charges so that they are in-line with the market and they need to make sure that they are competitive and seek for local solutions, especially for the software they are importing.
Former Finance Minister Tendai Biti also asked if the government had the capacity to put a cap on bank charges.
“My supplementary question is, can the Government cap bank charges? Can the Government lower the punitive rate of interest of 200% which is leading businesses to collapse because the oxygen of business is working capital derived and obtained from commercial banks?”
The Deputy Minister responded: “I think what Hon. Biti mentioned that the interest rates are very high and it has never been seen in our history. I think what we have done as a Government is, we just applied basic economics.
“This is basic economics because the interest rate is supposed to follow the inflation rate. At the end of the day, what investors want is to ensure that they will get a positive return.
“As the inflation rate moves, the interest will also move in tandem but for this peculiar case in Zimbabwe, what we wanted was to nip the speculative bubble that was there.”
He added: “People were borrowing money in order to participate in the parallel market and there was no production which was happening.
“In the case of production, what we have done as a Government is, for those who are borrowing for speculation we will apply the 200% interest rate but for those who are into production we are using 100%. So, I think this is in order and is basic economics,” Chiduwa said.