Maravi

(STICKY) (NEWZIMBABWE) Zimbabwe: alarming disconnect between banks and customers

COMMENT - This disconnect is not unique to Zimbabwe, it exists in Zambia, Malawi, South Africa etc. And of course the banks are the same in every country - Stanchart, Barclays, etc. - it's policy. Their investment decisions seem to be driven by the IMF and World Bank, like only investing in tourism, leaving ordinary entrepreneurs without a source of funding. Add a massive liquidity gap (for instance a 2% savings rate and a 24% lending rate), as well as an effective negative savings rate (you pay more in fees than you receive interest on those savings) and there is ample room for reform, even drastic reform like nationalisation.

Zimbabwe: alarming disconnect between banks and customers
22/10/2012 00:00:00
by Chido Makunike

ZIMBABWEAN banks and their customers might as well be on different planets about their ideas about what is minimally acceptable service.

While banks have previously been firmly in the driver's seat in this regard, recent and growing political and public pressure on them is shifting the power dynamics somewhat, with the customers' concerns at least getting more of a public airing than before. However, the banks remain largely tone-deaf to the reasons for so much public disgruntlement with their levels of service.

Zimbabwean bank clients grumble about high service charges not matched by commensurate levels of service. The government complains that many of the banks have a sectoral mindset determined more by thinking from Britain than from the needs of the Zimbabwean economy.

Businesses accuse the banks of being too tight-fisted in extending credit. Lower level bank workers complain that they are under-paid while executives of even struggling banks live it up.

No one seems to love Zimbabwe's banks at the moment. It is hardly surprising that the banking sector feels put upon.

Let's examine some of the banks' responses to this onslaught of criticism. 'Catch your bank doing something right' was the cheer-leading heading of an opinion piece in the NewsDay of October 18. The writer sought to help counter what he considers to be "the bank-bashing bandwagon."

How? Unfortunately, not by cataloguing ways in which the heated current criticisms of banks might be wrong. That would have been a useful way of putting across the banks' point-by-point arguments about why and how the current criticisms of them might be excessive.

In fact, Omen Muza, the author of the article, side-steps addressing the substance of those criticisms entirely. He instead responds to what he labels 'bank-bashing' by relating the corporate social responsibility/public relations-type exercises a number of the banks are involved in.

He gives the example of a 'fun walk' sponsored by one bank. Another 'good work' done by a different bank was to sponsor eye cataract surgery for the underprivileged.

"Banks do not always make enough effort to inform the banking public about such good things," writes our banking sector defender.

It is all very well to publicise such public do-gooder efforts by the banks, but it is almost entirely besides the point of why the public regard for such banks by that same public is generally so low.

It is a wonderful example of corporate good-citizenship if Barclays, Standard Chartered or any other bank are sponsoring these sorts of activities. The banks (or their media defenders) have every right to 'inform the banking public about such good things.' Any fair member of that banking public will say 'well done for being so public-spirited, bank X.'

But in no way can these sort of 'good things' by the banks excuse or make up for bad banking practices or poor banking services. It is quite possible and entirely legitimate for the banking public to praise bank X for sponsoring various public 'good things' and yet criticise them for falling short of their banking mandate, which is after all their core business, not sponsoring walks or surgery.

It would have been far more useful to banks and the public alike if the NewsDay opinion piece had addressed the question of where and how the public is being unfair in their 'bashing' of the banks.

George Guvamatanga, president of the Bankers’ Association of Zimbabwe, made some statements that are not particularly flattering in what they reveal about the mindset of the sector, but that are also unintentionally helpful in explaining why there is such a large gap between banks and their customers.

Addressing a conference of tourism businesspeople, Guvamatanga said,

"If you walk into any bank you will see that you are not a priority. We need to hear your story as tourism players at the moment you have not sold your story and, to be honest, most banks do not know your story."

Perhaps Guvamatanga should be praised for being open about this, but it is also shocking that he suggests that the banks almost have to be coaxed into exploring the money-making potential of Zimbabwean tourism.

If tourism business people have not made their 'story' heard to the banks (if that is true), that is certainly a problem. But why have the banks not sought to search out opportunities for them to make money from lending to tourism projects? Do the banks only wait for business to walk into their doors, rather than going out to seek it, like every other business sector is required to do and does?

What Guvamatanga's statement suggests is that Zimbabwean banks are not particularly pro-active in looking for areas in which they can get involved for their own benefit. This is perhaps partly because of very conservative thinking about opportunity versus risk in particular, and about business in general.

It may also say that the banks have many relatively low-risk ways of making money that don't involve much real business skills, so have little incentive to actually go out and look for new opportunities.

Tourism will once again become a key foreign-currency earner in Zimbabwe, as it once was. In fact, even in the face of the western media onslaught depicting the Zimbabwe of the past 10 years as a virtual war zone, tourism has continued to be a below-potential but still important source of hard currency revenue.

Many reports over the last two years or so have indicated that Zimbabwe tourist arrivals are steadily going up, by as much as 16% in 2012 over 2011. If those kinds of figures of growth are not enough to impressive and attract the interest of the banking sector to investigate money-making opportunities in tourism, what on earth will?

So one way Guvamatanga's remarks are important is that they make it clear to businesspeople that banks don't see it as their 'responsibility' to 'support' any particular economic sector.

Nor should they. But it is surprising when they openly declare ignorance about one of the few economic sectors showing the potential to give relatively quick and significant returns -to them as well as to their tourism sector clients. One would not think there would be any need for any external pressure for the banking sector to show more interest in tourism than Guvamatanga's comments suggest is the case.

Guvamatanga does in fact explicitly come out to say that too much is expected of the banks by the public.

He said: "You need to find an equity financier or a venture capitalist because you can have a bright idea, but the nature of the financial industry we have in Zimbabwe today does not have venture financing.

“We used to have Venture Capital Zimbabwe. It was there for a reason. We had Sedco, it was there for a reason. Agribank was there for a reason. We now have IDBZ. It’s there for a reason. So there is actually an opportunity in banking for other institutions. Unfortunately everyone is converting their licences to commercial banking."

These are valid points Guvamatanga makes in defence of his embattled 'industry.' Commercial banks are not particularly well-equipped to play all the roles expected of them. As he points, various specialty, business-targeted banks have not faired well in Zimbabwe.

However, it must also be said that for decades, those same commercial banks have long had business sub-sections whose functions overlap with those of the specialty banks he mentions. So to say that most Zimbabwean banks are generalists rather than business-lending specialists is not a full defence of their perceived (and confirmed by Guvamatanga) lending stinginess.

Even at the peak of Agribank's existence, that specialty bank had only a fraction of the agriculture-lending potential and portfolio of the bigger 'generalist' commercial banks.

But Guvamatanga's comments in this regard are important to businesspeople in another respect. That is the reality that the conditions under which Zimbabwean banks considered it to be good business (for them) to lend to economic sectors like agriculture simply no longer exist.

Agri-businesspeople can bitch about this all they want, but it would largely be a waste of time. It is simply necessary to look outside the commercial banking sector for their finance needs.

As Guvamatanga himself confesses, 'it was much easier to borrow as an individual than as companies.' This is certainly the lament of many businesses in Zimbabwe. Yet groups like the Affirmative Action Group (AAG) keep knocking their heads against the wall trying to change this. In the process, they seem as deaf and blind to the reasons that this is unlikely to change soon as the banks are to why they are so reviled.

Guvamatanga is reported to have also said: "To really ask them (banks) to provide developmental finance is almost impossible because they are not designed that way.” What he may have meant by 'developmental finance' was concessionary finance (interest rates and/or other terms).

Indeed, some in government and in the private sector's 'empowerment groups' do naively talk as if they expect banks to give gift-finance, which is obviously unfair to ask of the banks, and unrealistic anyway.

Yet Guvamatanga's implication that 'developmental finance' and commercial, profit-making finance are necessarily and always contradictory must be interrogated. Decades of funding the development of Rhodesian (and later, briefly Zimbabwean) agriculture was certainly 'developmental' in national terms, but it was done on commercial terms.

A key challenge which the Zimbabwean economic/business environment of 2012 requires is for leading economic 'stakeholders,' including the banking sector, to come up with innovative new models of how unavoidable developmental and commercial imperatives can best be twinned. Guvamatanga's statements make it sound like the banking sector considers itself a mere bystander in this great challenge Zimbabwe faces, rather than a key driver/leader of thinking about how to overcome it.

The amusing, somewhat ambigious heading of the NewsDay article reporting on Guvamatanga's comments was 'Financial sector shallow.' A reading of the article makes it fairly clear that by 'shallow' the paper was referring to Guvamatanga's comments that Zimbabwe's banks were not as highly developed/specialised to meet the many demands on them as those in more sophisticated banking markets.

Unfortunately and no doubt unintentionally, the substance of Guvamatanga's remarks could also lead to a perhaps mischievous interpretation of 'shallow' to mean his weak defence of his industry against the current widespread 'bank-bashing.'

What is becoming more evident is the very large gap in mindset between banks and much of the 'banking public.' It is unfortunate that those differences are coming out in acrimonious, almost accidental ways rather than by the two sides really talking to (instead of at) each other. Nevertheless, this messy process is still useful in clearing the air about the very different ideas about what the banking public expects, and what the banks are willing to do or regard to be possible.

Zimbabwean banks, congratulations, thanks and 'good work' to those of you sponsoring fun walks and cataract surgery for the indigent. But that still doesn't excuse lousy, slow and sullen service in the banking halls. Surely a bank does not have to be 'developmental' in its thinking to give its customers that very minimal level of service?

A big part of the negative public attitude against Zimbabwe's banks is the perception that they are arrogant and unable to consider that there are indeed many areas where they under-perform. If there is now an element of unfair 'bank-bashing,' it is not so much that the banks fail to publicise their sponsorship of 'fun walks.'

It is that they so consistently, so rigidly refuse to consider that some/a lot of their customers' criticisms of them may have validity and need to be addressed not with propaganda, but with improved value-for-charges service.

Labels: BANKING

posted by MrK @ 4:59 PM