FINANCIAL LIMELIGHT WITH KUDZAI GOREMUSANDU.
(News Of The South) – Sub-Saharan Africa has the lowest savings rate in the developing world. While figures vary from country to country, gross domestic savings in the region averaged about 18 per cent of gross domestic product (GDP) in 2014, compared with 26 per cent in South Asia and nearly 43 per cent in East Asia and Pacific countries, according to World Bank estimates.
The appetite of saving among the general populace has slowly improved in Zimbabwe. The function was heavily affected during the hyper –inflationary era until the introduction of the multi currency system in 2009. Most potential savers had lost confidence in the local banks and have opted to keep their financial resources within certain parameters.
The problem of inadequate saving capacity is poses a serious challenge for banks since there will have less financial resources to extend as loans. The financial sectors in developed countries are mostly financed by financial resources which are drawn from the household savings. Saving accounts are an imperative form of finance of a financial institution and there help the banks to meet there short-term financial requirements.
Some local banks particularly foreign owned, have been lagging behind on developing innovative new products and services that suits the ever-changing market requirements. The financial markets are changing rapidly so the bracket approach to banking cannot apply. India financial sector has managed to improve their products and services in recent years by adapting to costumers needs and wants. In India the banks have come up with banking products which are targeted towards the informal workforce and the banking structures are design in a way that there penetrated their operations in rural areas.
The framework of banking in Zimbabwe has been dominated by lack of clarity in banking approaches and rules. In Zimbabwe most financial resources are now centralised in the informal sector, if banks can creatively broaden their services and tap into that market, the culture of saving can improve in Zimbabwe. An estimate of about 2 billion dollars is circulating outside the formal sector; it is now time banks should take a robust measure to mop up all those financial resources.
To tap into such markets, it is necessary to for banks to introduce new financial products or instruments that respond to the saving needs of households. Savings products that permit easy accessibility and allow for small transactions at frequent intervals would encourage households to shift to the formal system, thereby making such assets available for productive investments.
Financial institutions have to standardize their products and services so that they suit various clienteles. A potential saver in the informal sector is not saving not because he/she is unable but he lacks knowledge of the services which banks can offer to such potential savers. Bankers have to change the attitude there have towards informally employed people and businesses because some have come from the formal sector are well-versed of all formal procedures which banks require. Marketing of banking services and products has to be improved if new clients are to come by in the financial sector. The overall demand for banking products and services requires banks to develop new innovative products and a more costumer friendly approach through the introduction of customised products is needed.
The technological drive that has become imperative for the banks to deliver the product and service has to be updated so that a new banking age is adopted.
Uses of a saving account
Some individuals use savings accounts to save up money for a specific goal, such as a down payment on a home or a future vacation. Others have no specific plans for the money, but use the account as a way to store their cash in a safe place while earning a return on it. Some savings accounts are used as an emergency fund, allowing an individual or family to save money safely to be used in case of emergency circumstances, such as job loss or hospitalization. An ATM card can often be linked to a savings account, but this card can only be used at automated teller machines, not as a debit card to buy things at stores.
Savings barriers
There are many reasons for Africa’s low savings rates, including inadequate financial services. Physical distance from banking institutions and high minimum deposit and balance requirements mean that the majority of the population does not get access to banking services. As a result, only about 20 per cent of African families have bank accounts.
In East Africa, Ethiopia, Uganda and Tanzania each have less than one bank branch per every 100,000 people. The ratio is better for some Southern African countries. Namibia has more than four, Zimbabwe more than three and Botswana nearly four. Banks’ minimum balance requirements and the cost of maintaining an account are too high for many people.
Zimbabwe is one of the nations in southern Africa that has the highest rates of the unbanked population. According to the financial budget presented last year about 13% of the people in the country use saving products. Locally, the most outstanding saving products available in the local financial sector are summarised below.
Commercial Bank of Zimbabwe (CBZ), the country’s leading bank by deposits and assets, has come on board to champion the restoration of a savings culture in Zimbabwe. In line with the strategy to offer innovative products to clients, CBZ Bank introduced a new high Interest earning Account (5%-8% depending with the amount deposited), the CashPlus Savings Account in July 2012. This new product offers competitive tiered interest rates and free banking services to clients. The product is in five categories, namely:
• CASHPLUS INDIVIDUAL ACCOUNT
• CASHPLUS BUSINESS ACCOUNT
• CASHPLUS HOUSING ACCOUNT
• CASHPLUS TEEN ACCOUNT
• CASHPLUS JUNIOR ACCOUNT
•
Stanbic Bank offers a Plus Plan saving account. A savings account that earns a high interest rate, which means your money, grows faster and you reach your financial goals quicker. There is a Junior Plus Plan Savings account that you can open for your children to encourage them to save. Plus Plan maintains no monthly services fees and withdrawal charges.
In April 2012,FBC Bank introduced the Pfimbi/Isiphala Savings Account which earns interest on a monthly basis and does not attract any bank charges.
POSB also came up with the following products; Junior Save, SmartSave and EasySave. JuniorSave and SmartSave are targeted at the teenagers and toddlers respectively, whom it seeks to teach the importance of saving.
Juniorsave is targeted at those under the age of 16, whom it seeks to encourage to adopt the culture of saving, hence the minimum deposit amount of $5, 00. Smartsave also allows one to save with as little as $5.Easysave is a fixed-term account under which one makes a once-off investment and chooses a term that suits them from one, two, three, six or 12 months
Kudzai Goremusandu is a refined banker and a financial expert who is willing to work with financial institutions in addressing all the challenges bedevilling the financial sector. The financial industry is the linchpin of the economy.
He can be contacted at kgoremusandu@gmail.com
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