With a dwindling revenue potential set in motion by the low interest environment, many believed that the prohibition on the upward adjustment of bank charges, fees and non interest income simply provided a conveyor that would catapult local banks towards a gloomy landing.
The Bank of Botswana (BoB) imposed a two-year moratorium on any upward adjustment of bank charges and fees with effect from January last year. As the low interest rates gobbled banks’ interest income, the moratorium also threatened to eat into banks’ non-interest income. However, it appears the top three banks; Barclays, First National Bank (FNB) and Standard Chartered have passed the test. The recent financial performances of these banks indicate that their non-interest incomes increased despite the fixed charge ceiling. Motswedi Securities’ financial analyst Tlotlo Ramalepa relates the growth in non-interest income to the banks’ innovative spirit.
“It is very important to note that although the moratorium was put in place, this does not necessarily hinder commercial banks from coming up with more innovative strategies to boost their non-interest revenues. Therefore there is still room for the banks to drive profitability under the challenging environment,” noted Ramalepa.
The fixed position on charges, put into effect by Bank of Botswana in 2014, was not based on conclusive evidence that banks impose high charges on their products and services, but was rather supported by what the general public perceived to be towering charges that did not match the quality of services that they received from banks. The services include ATM cash withdrawals, internet and mobile banking.
The Botswana Bankers Association announced shortly after the moratorium was effected that they will conduct a tariff study, which they expected to use to lobby for the moratorium to be lifted. It would appear that the study was prompted by the Bank of Botswana’s decision to impose a two-year moratorium on any upward adjustment of bank charges and fees.
To date, there has not been any official communication regarding the results of the study which was started in February last year. The study was anticipated to among other things establish if bank charges were in actual fact high by doing a country and regional comparison. The Botswana Bankers Association could not confirm if the study has been completed and what its findings were at the time of going to print.