High bank charges impede financial inclusion – Mohohlo

SHARE   |   Monday, 24 October 2016   |   By Kabelo Adamson
Mohohlo and Bogatsu Mohohlo and Bogatsu

High charges levied by banks on customers works against the principle of financial inclusion and discourage savings, former Bank of Botswana (BoB) governor Linah Mohohlo has said. On Wednesday – a day before her retirement as the governor of the central bank having held the position for 17 years – Linah Mohohlo delivered a keynote address at a gala dinner hosted by FNBB in celebration of 25 years of existence in Botswana.  “The insidious effect of the high charges is that they impede progress towards financial inclusion; they also discourage saving and the all-important activity of effective financial intermediation in support of the wider economy,” said Mohohlo. She said the regulator – Bank of Botswana – will continue to review the charges levied by the banks so as to encourage and facilitate access to banking. In January 2014, BoB imposed a two year moratorium on upward adjustment of bank charges. No bank was permitted to make upward adjustments on banking tariffs, with the exception of monetary policy or Bank Rate linked interest charges.

The suspension on adjustment of charges ended in January this year, and several commercial banks immediately published new tariffs, FNBB included. Mohohlo also made reference to the recent report by KPMG entitled “Banking Industry Customer Satisfaction Report for Africa” which has shown that eight out of the 14 countries surveyed considered “friendliness of staff and their willingness to assist” to be the most important measure of customer care. “This suggests that customers need more than just access to finance; they need to be made welcome and afforded pleasant and helpful service,” she said. Mohohlo acknowledged that the cost of banking in a vast and sparsely populated country like Botswana can be high, but said it is a matter of serious concern that in a number of instances, the quality of service does not warrant the charges levied by banks for the associated services. “As a result, a perception has developed that charges are as high as they are, to the point of being exorbitant, to compensate for banks’ internal inefficiencies.”

Another school of thought, the former governor said, is the one that was prevalent in the United States of America and United Kingdom where, amid the ravages of the global financial crisis, it was observed that compensation schemes, which include bonuses that are tied to short-term profitability, were excessive and, in turn, influenced the high level of charges, wondering whether it is the case here too. Mohohlo also used the opportunity to highlight long-expressed concern of BoB – bank ownership. At the moment, there is no commercial bank operating in Botswana that is locally owned with the majority of them being subsidiaries of foreign-based banks. “While it is normal to expect that the parent bank would have overall responsibility for major strategic and policy decisions affecting the group, it is crucial that within this hierarchical structure, important business decisions relating to the day-to-day operations of a subsidiary bank are made and tailored to the needs of Botswana,” she said. She said though mentoring and advisory services are not discouraged, routine referrals for decision-making to the regional office or headquarters can only undermine the subsidiary’s course, as well as entrench the dearth of banking skills available domestically.

FNBB’s silver jubilee
According to FNBB Chief Executive, Steven Bogatsu, the bank was bought for P1.00 and operated three branches which were in the Main Mall, Game City and Lobatse and had 1300 customers. He said since then, the bank witnessed an exponential growth in employee numbers, customer numbers and in profitability despite being the newest entrant of the four largest banks in the country, in the 25 years of operation. Bogatsu went to list the number of initiatives introduced by the bank over the past 25 years, which includes among others the introduction of cellphone banking services and mobile money transfer which is commonly referred to as e-wallet. He said the bank has also won several accolades such as Most Innovative Commercial Bank Botswana by the Global Banking and Finance Review Award for 2014 and Best Commercial Bank in Botswana 2016 by the International Finance Magazine (IFM) Awards among others.