CM: You have recently assumed the reins at the Bankers’ Association of Zimbabwe. What would you say are the immediate challenges facing the banking sector in Zimbabwe that require you to hit the ground running?
GG: Tackling liquidity challenges is one of our main priorities as an association. BAZ fully supports the efforts being made by the Ministry (of Finance) and the Reserve Bank of Zimbabwe (RBZ) to improve the liquidity situation in the financial sector, particularly the resuscitation of an active inter-bank market, which will allow banks faced with liquidity problems to access assistance from those banks with excess liquidity.
BAZ recommends that the RBZ should be capacitated to fully assume its role as a lender of last resort and banker to government. We as BAZ believe that the central bank should assume its role as banker to the government. This would capacitate the central bank to start issuing Treasury Bills as a tool to smoothen its cashflows within the cost budgetary framework by anticipating monthly collections from the fiscus.
The uses of short term (instruments) such as Treasury Bills also assists the government to borrow on the interbank market to smoothen its cashflows. We recognise that cash budgeting is important in managing government expenditure, but discretionary expenditures are inevitable. To that effect, the said short term paper would play a pivotal role in such cases.
CM: Two years ago at the Winter Banking School, you warned the industry of risks associated with aggressive lending practices. What is your general comment on current lending practices within the sector?
GG: Notably, lending practices have improved over the past two years due to an increase of checks and balances, coupled with robust risk structures that have positively impacted on the industry. BAZ estimates that some companies and individuals in the market may be over-borrowed, resulting in an increased level of defaults within the banking sector.
In efforts to rectify this situation, BAZ is at an advanced stage of establishing a credit bureau, working with an international technical partner. The introduction of a credit bureau will provide robust risk structures that will positively influence this area.
CM: Banks are accused of not doing enough to attract the estimated US$3 billion that’s circulating in the informal sector. What are the challenges faced by banks in achieving financial inclusion?
GG: BAZ has, in the past, committed itself to ensuring that banking services are available to all Zimbabweans across the country. This issue of financial inclusion remains a critical area and has challenged banks to introduce creative products that address this anomaly. As a result, e-channels and mobile banking initiatives will see an increase in transactional volumes with people living in previously underserved areas.
CM: We have the long outstanding issue of the change problem being faced by the transacting public due to the unavailability of foreign coins. Your association once proposed a solution to the problem but this was not successful. Has BAZ given up or you are working on an alternative solution?
GG: The challenges found in the importation of coins remain an inhibiting factor in efforts to provide our transacting public with convenience. BAZ is currently engaged with relevant stakeholders in identifying solutions to this issue and in the meantime continues to encourage consumers to use plastic money to avoid the inconvenience associated with the absence of coins.
CM: Banks are now trading in profitable territory, but there is some criticism for perceived overcharging on interest rates and other charges. Could you give us your views as BAZ on the issue?
GG: The general perception of banking charges and overcharging of interest rates is due to a limited understanding of the various facets that when amalgamated, set the base for these charges. BAZ recognises that it needs to provide banking customers with an appreciation of the operations of banks.
It is important to note that interest rates are influenced by the liquidity conditions prevailing in the market. Bank charges are comprised of the unit cost of each service, labour costs, telecommunication and utility costs, direct and indirect costs incurred to achieve and maintain infrastructure, services and ever-changing global advances in banking through e-channel services.
For instance, most of the time, banks would be operating on generators and purchase water for most branches. These considerations form an integral basis of calculating charges in relation to the cost of providing various services. In addition, banks introduced low cost channels such as internet and mobile banking. However, our customers still prefer branch banking, which is relatively expensive (as opposed to cheaper) e-channels.
Inactive or dormant accounts incur costs to the banks as they will still be required to pay licence fees and have dedicated personnel to monitor these accounts. This has resulted in banks moving towards fully charging for bank services which the transacting public is not used to.
BAZ has also realised that the public has a limited appreciation of the fact that there is no direct relationship between bank charges and deposit interest rates, as the former are informed by operational costs and the latter is driven by liquidity. In comparison to the region, Zimbabwean banks are small but operating costs are relatively high.
We recognise that the survival and growth of the banking sector is primarily driven by the confidence of the transacting public. To this effect, transparency and integrity remain important aspects in gaining that confidence.
CM: What is your vision for the BAZ and during your term what new things should we expect?
GG: My vision for BAZ is to solidify it as a true representative of all banks. It is my goal to improve working relations with other groups and organisations within the industry through a vigorous stakeholder management programme. I see BAZ entering a space where it plays a critical advocacy role in informing and educating its publics. I believe that we can take our industry to global standards, with banks that continue to be well respected and recognised institutions of note. It is also important that we embed the culture of self-regulation among bankers.
CM: What do you think should be done to preserve and improve the stability of the banking sector?
GG: I believe the introduction of a Code of Conduct to enhance self-regulation for all financial institutions is critical. In addition, uniform reporting standards for financial reporting services can only take our industry to global levels.