ZIMBABWE’s banking industry must develop financial products that cater for a growing number of cross border traders travelling to South Africa daily who are forced to carry huge sums of cash, a financial services expert has said.
Hennie Bester, a director at the Centre for Financial Regulation and Inclusion (CENFRI) based in South Africa, said banks had failed to see opportunities that have developed from the cross border trading system, where millions of United States dollars are now exchanging hands per annum as Zimbabweans switch to imported goods.
“Zimbabwean cross border traders carry cash into South Africa; it is an opportunity for banks to provide these people with financial services to access their money in South Africa. About 70 buses leave Harare every night for South Africa,” Bester said during a conference on financial inclusion held in Harare.
He said there had been muggings against cross border traders, which made their safety critical as the sector had now become critical to the economy.
Bester said there were also opportunities for the banking sector and other financial services providers to sell services directly to Zimbabweans in the Diaspora, who are estimated at about 3,3 million.
Opportunities were available in motor vehicle insurance services, home insurance and travel services, said the CENFRI boss.
He said the financial services industry was already providing such services but at a smaller scale compared to demand for financial solutions.
CENFRI was among three institutions that carried a survey on financial inclusion in Zimbabwe, which was released recently.
Bester spoke as Finance and Economic Development Minister, Patrick Chinamasa, said banks in Zimbabwe should widen their scope to include previously unbanked sectors.
He said the banking sector must come up with strategies to lure informal sector operators to open bank accounts as most funds held by informal businesses were not coming into the financial system, leading to the current situation where banks were starved of liquidity to lend to industries.
About 70 percent of the economy is now estimated to be in the informal sector.
Chinamasa said government was finding it difficult to raise revenue through taxes because taxing the informal sector had proved to be difficult.
Some estimates have indicated that more than US$7 billion was circulating in the informal sector, although this number has been disputed by other officials, including the Reserve Bank of Zimbabwe.
“There has been a structural shift to the informal sector. The larger economy is now presiding in the informal sector. I cannot ignore the informal sector. More money is now flowing in the informal sector than in the formal sector. But it is difficult to tax the informal sector,” Chinamasa said.
Turning to the banking sector, the minister said there was significant demand for banking services in the informal sector.
However, the banking industry had failed to come up with products that suited the needs of the sector to encourage operators to open bank accounts.
If the banking sector, with a US$4 billion deposit base at the moment, opened up to the informal sector, the level of deposits would rise, and this funding could then be channelled towards industries through lending.
Follow us on Twitter on @FingazLive and on Facebook – The Financial Gazette