Banks smile all the way to the bank, while depositors bear cost of high fees

Shareholders in Zimbabwe's banking sector are enjoying robust returns on their investments, as banks continue to post strong profits and declare sizeable dividends. However, concerns are mounting among depositors over rising bank charges and limited benefits from the booming sector.

According to the Reserve Bank of Zimbabwe (RBZ), in 2024, fees and charges accounted for 22% of banks' total earnings, making them the second-largest income stream after foreign currency asset revaluations, which contributed 34.42%. In contrast, interest income from loans and advances - a core banking function - contributed just 13.1%.

Despite these skewed income structures, several banks have issued dividend payouts, signalling strong balance sheets and continued profitability.

Ecobank Zimbabwe is set to pay out ZiG139.58 million (US$4.39 million) in dividends for the period ending December 31, 2024.

FBC Holdings has declared a final dividend of US$0.25 and ZiG3.90 per share, in addition to a US$0.25 interim dividend disbursed in October 2024.

CBZ Holdings has proposed a US$10 million payout, equivalent to US$1.61 per share, while the National Building Society (NBS) confirmed an interim dividend of US$420,000 to its sole shareholder, the National Social Security Authority (NSSA).

Local financial analyst Mr Clifton Dube noted that the consistent dividend declarations reflect growing investor confidence and underline the banking sector's resilience.

"Zimbabwe's banking sector has remained profitable despite economic headwinds. Enhanced digital platforms, diversified income streams and strict cost management have driven this growth," he said.

He also credited RBZ regulatory oversight with improving capital adequacy and liquidity positions, helping banks withstand inflationary shocks.

However, the windfall for shareholders has drawn criticism from the banking public, who face steep fees, high interest rates, and limited access to credit and financial services.

Bankers Association of Zimbabwe (BAZ) president Mr Lawrence Nyazema, who also heads CBZ Holdings, defended the income model, stating that revaluation gains and forex movements - spurred by currency volatility and inflation - remain significant contributors to bank earnings.

"There are distortions in financial reporting caused by applying global accounting standards to our local context," Nyazema said. "Moreover, competition exists - there are at least 16 banks offering a range of products."

Yet customers continue to lament high account maintenance charges, transaction fees, poor customer service, and limited international banking functionality.

In response to these concerns, the RBZ recently directed banks to improve savings interest rates and abolish transaction fees on payments of US$5 and below, or equivalent amounts in the Zimbabwe Gold (ZiG) currency.

Still, RBZ figures show the imbalance persists. The central bank's Monetary Policy Statement revealed that banks earn far more from fees than from interest on loans - a worrying sign for a sector expected to facilitate economic growth.

Economist Ms Alice Chikonzi warned that the financial system risks becoming extractive, rather than developmental.

"Authorities must promote a banking model focused on lending to productive sectors like agriculture, manufacturing and SMEs," she said. "This could involve tax incentives, interest rate subsidies, or risk-sharing frameworks."

She also advocated for greater fintech competition and smaller bank entry, saying increased diversity would drive innovation, lower costs, and enhance service quality.

"By redirecting the sector toward savings mobilisation and credit extension, Zimbabwe can build a more inclusive, resilient, and development-oriented financial system," she added.

As bank shareholders enjoy windfalls from dividend payouts, questions remain over whether depositors - the backbone of the banking system - are receiving fair value in return.