Published: 5 hours ago

High bank charges imposed by local financial institutions are choking financial inclusion in Zimbabwe and running contrary to best practices across the region, a new National Economic Consultative Forum (NECF) report has revealed.

The report, which assesses Zimbabwe's financial inclusion infrastructure, highlights excessive costs as a major deterrent for individuals and businesses seeking to use formal banking channels. Beyond fixed monthly charges averaging US$5, the study found that banks impose a US$3 fee for every US$100 withdrawn, while mobile money transactions attract a 3% levy and informal sector payments face 4% in additional charges.

"The cost structure of banking services significantly affects financial inclusion, particularly for the informal sector," the NECF noted, warning that such expenses discourage trust and participation in the formal system.

The Forum also raised concern over borrowing costs, with loan interest rates averaging 12%, a figure it said was unaffordable for small-scale and informal businesses that dominate the economy.

In contrast, South Africa offers more accessible services, with bank charges of around US$3 per month, a 2% mobile money transaction fee and borrowing rates averaging 7%. NECF said this affordability, supported by stronger infrastructure, has helped South Africa achieve wider financial inclusion.

The report further identified structural challenges in Zimbabwe, including limited banking infrastructure in rural areas, where 67% of the population lives. The informal sector, which accounts for about 90% of economic activity, remains largely excluded from formal financial services despite widespread mobile network coverage of 90%.

However, gaps in financial literacy, estimated at just 35%, coupled with high mobile money costs, continue to restrict adoption of formal services. Internet penetration, at 36%, is also undermining the expansion of digital financial solutions compared to countries with higher connectivity rates.

On bank branch density, Zimbabwe scored 4.5 per 100,000 adults, far below South Africa's 9.8 per 100,000. The Forum urged policymakers to focus on reducing costs and expanding internet connectivity, particularly in rural areas, to boost financial inclusion.
- NewZimbabwe

You might also want to read this

• Zimbabwe FIU fines banks over weak AML Controls
• Banks to report on rural financial literacy outreach
• Ex-bank consultant jailed for US$23,000 fraud
• Zimbabwe banks show strong capital buffers
• Zimbabwe banking sector profits drop
• Top banker exposed in land deal
• 18 Zimbabwe prosecutors arrested for corruption charges
• Zimbabwean consumers failing to secure loans from banks
• Zimbabwe women's bank opens 11 000 accounts in 2024