Zimbabwean banks' self-inflicted image woes

Chido Makunike

This is a tough time for Zimbabwe's banking sector, with attacks on them from seemingly every quarter. It is also a tough time for all Zimbabwean economic players, with deep structural changes in recent years that all are battling to catch up with. But many of the problems which alienate the banks from the public have been building up for a long time, and many of them emanate from their aloof treatment of their customers.



Doing even ordinary, everyday business with many banks in Zimbabwe is often a stressful chore. Long, slowly winding queues while several teller booths are unmanned is a common, frustrating occurrence. The idea of a smile or friendly greeting to a customer is foreign to many bank staff. The idea of winning over customers by making the banking experience quick, convenient and pleasant just hasn't widely caught on.

Some banks provide various flavors of so-called 'prestige' banking. Very often this involves no more than charging customers extra fees for services the bank should routinely, freely provide its customers.

While most salaried workers and businesspeople have no choice but to do business with one bank or another, there are relatively few Zimbabweans who speak with any particular enthusiasm about the services their banks provide. Dealing with banks is taken by many as one of those unpleasant but unavoidable facts of life. 

This is before getting into commonly heard complaints like charges for not only withdrawing cash, but for deposits as well! It is like extortionate banking-as-a-favor; a business attitude from a primitive, less informed service era.

The banks' reputation was not helped by Zimbabwe's hyper-inflationary period in the several years up to 2008. Hyperinflation-caused shortages of cash made many ordinary people hostages of the banks then, who were at their most aloof and haughty. The basic economic problems that caused hyperinflation, cash shortages and the many related problems that caused so much misery during those years obviously weren't the fault of the banks. But the way they dealt with the symptoms of the problems and with their customers caused further resentment against them.     

There are some experiences from the crisis years many Zimbabweans will never forget. Many motorists will remember of hearing the mere unconfirmed rumour of the possibility of a distant service station getting fuel, rushing there with whatever fumes were left in one's car tank, taking one's place in the already long and winding queue, sleeping in the car overnight while waiting for the fuel to arrive. And then to only be told at noon the next day that the fuel isn't coming after all, or have it come and then run run out just as one pushes one's car to the pump!

Another unforgettable, typical experience was being in a queue outside a bank for hours, not knowing if and how much money one would be able to withdraw, and being treated like dirt by banking staff in the process.

When inflation got unbearable and the central bank's printing of money had clearly got un-sustainably out of hand, the Zimbabwe dollar was scrapped overnight and replaced by mainly the use of the US dollar. That wiped out hyperinflation overnight, but it also wiped out most people's bank accounts overnight as well.

The banks, fairly or unfairly, bore a lot of the lingering resentment of that pivotal moment. Not used to explaining things well to customers or treating them like valued clients instead of like barely tolerated nuisances, the banks made feelings against them harder by their poor public relations during that most stressful period.

So there are many reasons why the Zimbabwean public does not generally have warm and fuzzy feelings towards banks.

Amongst the biggest are British-origin Barclays Bank and Standard Chartered Bank. They are currently under relentless pressure to cede majority ownership to Zimbabweans under the Mugabe government's controversial 'indigenization'  empowerment drive. The central bank chief has warned of banking and economic disaster ('the banking sector is sensitive, foreign investors will run away in droves, the sky will fall,' etc) if the government goes ahead with this initiative.

The forced localization of these long-established, 'stable' and relatively 'trusted' banks may alarm many members of the public worried about the stability of many of the smaller, newer local banks. But the central bank chief's impassioned defense of those banks against indigenization has failed to stir widespread public sympathy for them.

'Banks under fire for fleecing clients' is a newspaper headline that well summarises common sentiment amongst the banking public in Zimbabwe. They are accused of 'fleecing unsuspecting customers by levying exorbitant charges, fees and commissions' and the chief of the central bank was set to meet with them to 'demand corrective measures.'

Amongst eight banks surveyed, 'incomes from bank fees and other charges and commissions comprised between 39% and 77% of their gross earnings between January and June this year,' according to the article in the ZImbabwe Independent.

Said Reserve Bank of Zimbabwe governor Gideon Gono, “They are meeting their profitability objective without lending and without doing their core business. It is much safer (for them) not to lend or to extend short-term loans and compensate themselves through high bank charges."

Apart from being accused of ripping off their customers by numerous high charges for services which would cost much less or be free in other banking markets, the banks in Zimbabwe are charged with screwing their clients further by offering very low interest rates for deposits, driving more customers away and further enraging those who remain.

Examples given in an article in the Herald of September 12 with the heading 'Bank depositors demand action' are charges of 'US$3 per transaction and US$5 for account maintenance per month, (and) no interest on savings and current accounts.'   

In the context of the indigenization debate, the worst profiteers are said to be 'the foreign-owned' banks. This does not help them at all in regards to the political pressure they are already under.

To which the banks plead that their operating costs are very high, and that depositors do not bank their monies long enough for the banks to be able to on-lend on favourable terms. Very few people seem to buy the banks' defense, such is the low level of regard and credibility the banking sector has in Zimbabwe at the moment.

Perhaps in reaction to the flood of attacks, a senior official of one bank came out to claim that the 'banking sector has started promoting a saving culture by exempting charges on savings products.' This is probably too little to late. In an economy where unemployment is high and salaries low, there are insignificant numbers of people who are going to have any money to speak about sitting in savings account.

Banks, rather than being in a 'fresh bid to spur a savings culture,' are actually accused of encouraging salaried workers to take out consumer loans. Such loans are an easy, fairly safe cash cow for the banks because the monthly payments can be deducted directly from the customer's salary deposit. Good as these loans are for the banks, they hardly encourage a 'savings culture!' One has a sense of the banks speaking out of both sides of their mouths, saying things contradictory to that which they do, very much like that other lowly regarded sector, politicians. 

But try to interest the banks to lend to manufacturers, farmers and other sectors whose growth has long term implications for the economy, and they have a thousand and one reasons why they can't do that.

Another article that spoke volumes about the banks' attitude towards their clients was 'Banks reap from CD1 forms' in the Financial Gazette, 07 September 2012.

CD1 forms are issued by the central bank and are required to be filled in by all exporters. The central bank avails them to intending exporters through banks. The price set by the central bank for banks to charge their customers for the forms is US$5.

A question that immediately comes to mind is why there is a charge at all for these forms. It seems to reflect an attitude of penalizing rather than motivating/rewarding the too-few who are exporting anything from Zimbabwe at the moment, which is one of the biggest problems the economy as a whole faces. But let us leave that issue aside.

In a properly functioning, productive economy, banks would be making the bulk of their money from lending and providing a myriad of other services to the productive sector - like exporters. The many funny exorbitant charges the banks levy on even humble small individual clients are partly because that productive sector is struggling.

One would think that rather than depending on thousands of very small individual investors, the banks would see the sense and benefit of cultivating long-term business with those of their clients who show promise of being the big corporates of tomorrow - like the exporters.

For example, a bank could win selected exporters' loyalty easily, cheaply by even waiving the central bank's recommended $5 charge for a CD1 form. That costs the bank a mere $5 in short term revenue, but wins it far more in the gratitude and long term goodwill of its client, the affected exporter. Actually, an even smarter way for the bank to 'market' such a 'favour' to the client would be to waive the upfront charge for the CD1 form, but then simply tack on that $5 (or more) to charges for processing the inward transfer of the payment for the client's exported goods. In the feel-good moment of receiving payment for his exports, the client is not going to quibble about a few dollars here or there for whatever 'extra' service the bank might want to claim to have done him in handling the transaction.

But what do the banks do instead? They actually charge their clients as much as $15-20 for the $5 forms! Earning easy, high markups while giving absolutely no extra value/service in this way is exactly why banks in Zimbabwe have such a poor reputation. In this case, the high markups result in fairly small total earnings for the banks, but the public revelation of the cynical practice have arguably earned the banks further bad publicity, and the loss of the goodwill of just the kind of client one would think they would be doing all they could to cultivate good long term relationships with.

That extent to which banks are willing to 'reap' by ripping off their clients even at this most basic level says a lot about the small-minded short term-ism that have made so much of the Zimbabwean public disgusted with the banking sector.

Ones senses a hurt bewilderment on the part of the banks at the attacks against them from government and the public alike. They feel that their operating conditions are poorly understood, that they are being unfairly picked on by everybody.

Perhaps that may be partly true, which would suggest that despite all the money they spend on high-profile but frequently customer-irrelevant advertising, they have failed to communicate in a way that fosters empathy for them from their clients.

But the self-pity and defensiveness of the banking sector only delays the fundamental self-introspection it must do about its whole approach to customer service, which has been poor and arrogant long before the recent/current tough economic times.

One thing that has changed recently which the banks have yet to catch up with is that their previously docile, compliant Zimbabwean customer has become more aware, demanding and assertive. For this credit the internet, greater travel and exposure, more financial services options, etc.

The banks, on the other hand, are still stuck in the laziness and arrogance of the old 'take it or leave it' days. They are now operating in an environment which increasingly demands that they work harder and more imaginatively to make money, but their attitudes and practices are still of a much easier time-for-them.

Almost everybody has had to drastically change their frame of reference to everything to be able to survive in the opportunity-filled but tough, very-different-from-before economic environment of the Zimbabwe of 2012. It is ironic that the banking sector, which might reasonably be expected to be at the forefront of reading the economic times, should in many ways actually be left behind by them.

Will Zimbabwe's banking sector learn to earn its keep by being innovative; giving its customers basic good service? Or will it remain stuck in its old ways by haughtily, pettily continuing to try to pick the pockets of its resentful clients? Will they learn to be introspective when criticized, as they widely are at the moment, or will they continue to bury their heads in the sand by insisting that the 'real problem' is simply that nobody understands the intricacies of their industry?

Will the current public crisis of confidence in Zimbabwe's banks finally force them to learn the 'trick' of earnings based on providing actual value for money to their long neglected, long abused clients?

The Zimbabwe Review