Malvern Mkudu

Revelations by the Reserve Bank of Zimbabwe that few Zimbabweans are using bank accounts is a worrying trend. The central bank revealed that fewer Zimbabweans are using banking services and products.

Government say they are targeting increasing the number of people using formal financial services by 2020.  However this will require radical policy shifts from the government as good intentions alone will not achieve the desired results

Most people now shun formal financial services after they lost all their savings when the country switched from using the Zimbabwean dollar to a multi currency system. The local currency had also lost value such that when the country switched to multi currency system many people lost their money.

This was as a result of the ‘print and borrow’  policy that the government was pursuing. It caused the inflation that resulted in the national currency becoming worthless.

Zimbabwe suffered some of the worst inflation in living memory as, the central bank under Gideon Gono then took over fiscal responsibilities plunging the nation into financial ruin. Gono who became the ‘defacto’ Prime Minister shepherded the nation into what he called “casino economics’ probably a fancy name for the dishonest dealings that were being carried out under his watch.

Many people who had trust funds and life insurance for the future of their children lost all their savings in a day. They will never forget these government induced erosion of their wealth.

Secondly a number of indigenous owned banks have folded and resulted in the loss of people’s savings. More than eleven indigenous banks have closed down since the 1990s and bad corporate governance has been a key factor in their closure.

Undeserving powerful politicians have muscled themselves into accessing loans that they have failed to pay. There have been reports of insider loans in the majority of the banks that have closed down. Misuse of depositors’ funds has not been sufficiently dealt with by the central bank.

Government recently lost a case against a Chinese company where they illegally accessed private funds in a bank account. In this landmark case were government exposed itself for not respecting property rights and deprived the company use of its money.

Thirdly one of the reasons why Zimbabweans are not saving is that they simply do not have money to save. According to official statistics most Zimbabweans live on less than $1 a day. The majority of our people live below the poverty datum line.

According to the Finscope of 2012 survey the informal sector employs about 5,7 million people and 40% of MSMEs owners less than $200 a month. 11% of these small business operators and their employees reported that they did not have any income at all.

Those who carried the last survey have said that they do not have resources to carry out a latest study but it is likely that conditions would have worsened considering that the liquidity situation has deteriorated over the last 3 years.

The cost of these financial products and services is beyond the reach of the majority of ordinary Zimbabweans. It costs $3 to do a transaction in one of the big banks and this constitutes a daily income of a vendor selling their wares in the streets of Harare. At such prohibitive costs it is inconceivable that Zimbabweans would utilise the financial services available.

Without implementing policies that significantly increase the incomes of the majority of our people , government must not expect them to save money through formal financial institutions.90 % of Zimbabweans are unemployed making them dependent on their informal businesses.

Instead of concentrating on trivial issues, government should be looking at how it can encourage long term savings especially by those in the diaspora. This is unlikely to work though considering that most people who left the country do not trust the government of President Mugabe.

Government’s decade of dishonest dealing with its citizens have resulted in the complete breakdown of the social contract between citizens and government. The mistrust has resulted in citizens shunning formal financial institutions where they feel they do not have adequate protection from government.

In light of recent cash shortages in banks such as CABS and Barclays, ordinary people have lost confidence in the banking sector. It will take time to rebuild the lost trust especially under the current government.

The banking sector in Zimbabwe requires massive overhauling before the public can place their trust in the system again. Those who have mismanaged depositors funds must be punished.

Without addressing fundamental political issues of governance in the country, many people are likely to continue treating banks and the government with derision. People will most likely keep their money in homes or outside the country