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Indigenous Banks Scramble for Crumbs

INDIGENOUS banks, which showed a lot of potential and promise a few years ago, now survive on crumbs as the country’s four big banks now account for more than half of business.

Latest banking figures show that deposits were at US$1,016 billion in October with the traditional big banks, Barclays, CBZ, Stanbic and Standard, accounting for 61%. This leaves the other 14 financial institutions scrambling for about US$390 million.

This situation is worsened by the fact that close to 90% of the funds are transitory, lasting less than 30 days within the coffers of the financial institutions.

While the indigenous banks, the nouveaux riche at the turn of the century, have met the minimum capital requirements with CFX Financial Services and the Zimbabwe Allied Banking Group (ZABG) being the odd institutions out, their future continues to be uncertain.

Analysts said while the bulk of business has since the introduction of multiple currencies been going to the big banks, it may be premature to rule out the indigenous financial institutions.

An economic analyst said it was not clear where the indigenous banks were heading but was quick to point out that the biggest bank, in terms of loans, deposits and other banking activities and aspects was CBZ which is an indigenous bank.

“We need to look at what is happening in other countries and at the same time ask the question why the big banks are getting that business,” said the analyst. “If you look at Trust Bank (one of the banks which faced difficulties and was incorporated into ZABG), you would realise that they were very flexible and very innovative, coming up with different products which made them the dominant bank. This means that indigenous banks still have a future if they are innovative though the playing field is tilted against them.”

This innovation saw Trust Bank as well as all the other banks which were established in the 90s taking over business from the traditional banks which were not flexible.

At its peak, Trust Bank took banking to the people, offering to collect money from shops and industries instead of the traditional banking procedure where money is taken to the banks.

Other innovative products included the Century Bank and OK Zimbabwe partnership, the link between the retail outlets under Meikles namely Barbours, TM Supermarket and Greatermans and Kingdom Bank.

However, at the moment the indigenous banks are faced with serious liquidity problems and cannot come up with innovative products as they are worried about their own survival.

Another analyst with serious interests in the banking sector who asked for anonymity said it would take time before the indigenous banks recaptured the market share as the banking public does not have confidence in them.

“It is not only the big corporates which have moved from the small indigenous banks but the individuals as well mainly because they suffered in 2004 and 2005 when their funds were locked in financial institutions,” said the analyst.

“The issue of confidence would take time and it is also up to how the banks move to the market, not the other way round, which would determine the time it would take before they reclaim the market share.”

Banking sectors in other countries were changing with non-banking activities being incorporated, yet in Zimbabwe even those banks with foreign parentage had continued to do business in the usual way giving room for those innovative enough to take up the space.


Leonard Makombe

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