Agencia de Informacao de Mocambique (Maputo)

Maputo — The Governor of the Bank of Mozambique, Ernesto Gove, on Wednesday warned that commercial banks who give clients other than exporters loans in foreign currency are contributing to the depreciation of the Mozambican currency, the metical.

Gove was speaking at the unveiling of the annual research into the state of the banking sector undertaken by the consultancy company KPMG.

The KPMG findings, referring to 2008, show that the sector is highly profitable, and that the problem of non-performing loans, which brought the two main banks to the verge of collapse in the late 1990s, is now under control.

“We have a very low rate of non-performing loans, less than three per cent of the portfolio”, said Gove. “In some countries, it’s 20 per cent”.

But he was concerned that, despite the advice of the Bank of Mozambique, some of the commercial banks continue to grant loans in foreign currency rather than in meticais to clients who are not exporters.

In principle, exporters will be paid in foreign currency, and so should have no problem in paying off loans in dollars or euros. But Gove regarded it as “a very serious risk” to give foreign currency loans to bank clients who are not exporters.

When the time came to repay the loan, such clients would try to convert their meticais into dollars, “which puts pressure on the exchange market, and leads to depreciation of the metical”, said Gove.

The advantage of loans in meticais, he added, was that the client “can predict exactly how much he will have to pay back”.

Gove politely suggested that the commercial banks should lower their interest rates, at least for reliable clients. in 2009, annual inflation fell to 3.3 per cent, the lowest rate since Mozambique began the transition from a planned to a market economy in 1987.

Yet interest rates remain prohibitively high. The current average interest rate on a bank loan is 16 per cent. Gove suggested it made good business sense to lower this rate on loans in meticais given to clients who inspired the bank’s confidence in their ability to repay.

Gove urged the commercial banks to cooperate with each other in sharing infrastructures such as ATMs (Automatic Teller Machines). at the moment, clients are heavily penalized if they withdraw cash from an ATM of a bank other than the one where their account is held.

If banks would cooperate and share facilities, this would help expand banking services in the countryside.

Currently the great majority of bank branches, ATMs, and establishments that accept payment by debit or credit card are in the main cities. only 51 of the country’s 128 rural districts have at least one bank branch. While this is an improvement on the situation three years ago when only 28 districts had banks, it still means that most rural Mozambicans are deprived of financial services, and have no safe place to keep any savings they may possess.

Never explicitly mentioned by Gove, but clearly hovering in the background, is the question of the extortionate charges that the commercial banks demand from their clients. last year, the Bank of Mozambique tried to curb the worst of these abuses, such as charging clients who dared to ask how much money was in their account.

Rather than behave in a civilized fashion of their own free will, the banks had to be coerced by a formal order from the central bank last September. This eliminated charges for a full monthly bank statement, or for a daily statement of the balance in the account, obtained either at a bank branch or for an ATM.

Charges for opening or maintaining an account were scrapped, and the banks could no longer demand charges merely because an account was dormant, as long as the balance was at least 100 meticais (3.6 US dollars).

The main banks hit back in October by increasing the charges for using their ATMs. Clients with the largest commercial bank, the Millennium-BIM, found they were charged five meticais rather than four every time they withdrew any sum of money from an ATM (an increase of 20 per cent).

Most banks did not exceed a five metical commission, but the Mozambican subsidiary of Barclays was much greedier, charging six meticais for the use of its ATMs.

The Barclays headquarters is in Britain, where there is no charge at all for using its ATMs – even if the customer’s account is held with a different British bank. This week Barclays announced in London that its profits had soared by 92 per cent in 2009, to 11.6 billion pounds (18.2 billion US dollars).

Despite all the uproar about obscenely high bonuses for bankers, and the role of the western banks in causing a global recession, Barclays calmly announced that it is handing out 1.5 billion pounds in bonuses for 2009, and another 1.2 billion to be paid over the next three years.

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