Banks Under Fire: Exorbitant Fees Choke Economy, D...

Banks Under Fire: Exorbitant Fees Choke Economy, Drive Informality

Nyashadzashe Ndoro- Chief Reporter

High bank and transaction charges continue to pose a significant challenge to financial inclusion and public confidence in Zimbabwe's banking sector, according to a recent report by the Parliamentary Portfolio Committee on Budget, Finance, Economic Development and Investment Promotion.

The Committee's findings, released following consultations on the 2025 Monetary Policy Statement, highlight that while the Reserve Bank of Zimbabwe has made efforts to reduce some fees, the overall cost of banking remains a deterrent for many citizens. This issue is seen as a key factor driving the preference for cash transactions over the formal banking system.

The report acknowledged the RBZ’s proposal to exempt transactions below US$5 or its ZiG equivalent from charges.

However, the Committee expressed the view that “a lot still needs to be done to reduce bank charges to promote banking as well as electronic transactions.”

A significant portion of Zimbabwean banks’ income now comes from fees rather than traditional lending. In 2024, fees accounted for 22% of banks’ income, while lending contributed just 13.46%. This shift is attributed to factors such as currency instability and the banks’ reduced lending capacity due to limited liquidity.

These observations come despite the RBZ’s commendable efforts to maintain a tight monetary policy, which has contributed to relative stability in the ZiG currency and exchange rates since its introduction in April 2024. Gold and foreign reserves have also seen substantial increases, providing stronger backing for the local currency.

The report also highlighted additional concerns, including the high policy interest rate for the ZiG (35%), which stifles borrowing for businesses, and savings deposit interest rates that remain below the inflation rate—eroding the real value of depositors’ funds over time.

Furthermore, unreliable infrastructure, such as electricity and internet connectivity, continues to impede the widespread adoption of digital payment systems, especially in remote areas. Low inter-bank trading among financial institutions was also noted as an area requiring urgent attention.

In response to these findings, the Committee has put forward several recommendations. It urged the RBZ to maintain its tight monetary policy while addressing liquidity challenges, reduce the policy rate to 20% by June 30, 2025, to stimulate economic activity, and align deposit interest rates with inflation trends by the same date to protect savings.

Additionally, it recommended that the RBZ collaborate with the Bankers Association of Zimbabwe to streamline bank charges by June 30, 2025, to encourage banking and rebuild public trust.

The central bank has also been urged to enforce inter-bank trading using Non-Negotiable Certificates of Deposit (NCDs) at 0% interest for a maximum of 30 days.

RBZ Governor John Mushayavanhu recently raised concerns over local banks’ heavy reliance on fee-based income.

“The central bank is collaborating with banks to ensure they return to their core function: lending money,” Mushayavanhu stated.

A recent analysis of five major Zimbabwean banks—AFC Commercial Bank, Stanbic Bank Zimbabwe, FBC Bank, CBZ Bank, and NMB Bank—revealed consistently high charges for basic services.

Monthly maintenance fees range from US$2.75 to US$6. Over-the-counter withdrawals incur charges of 3% to 3.75% (with significant minimums), and ATM withdrawals are typically charged at 2.5% to 3%. Real-Time Gross Settlement (RTGS) transfers can cost up to 2%, and even requesting an account statement carries a fee. These charges significantly erode customers' funds, making basic banking services feel like a "monthly tax" and potentially driving people toward informal financial channels.

The impact of these fees is particularly severe for lower-income earners. A hypothetical worker earning US$500—half of it in local currency—could face monthly bank charges ranging from US$16 to US$46, translating to 4% to 9% of their net salary.

This figure excludes other common fees such as ZIPIT, bank-to-wallet transfers, and SMS alerts. In comparison to major banks in South Africa (Standard Bank Group) and the United States (Citigroup), Zimbabwean banks’ fees are significantly higher relative to income levels.

The reliance on percentage-based withdrawal fees, particularly amid volatile exchange rates, adds an unpredictable financial burden on those earning in local currency.