Concern as higher banking fees come into effect today

Commercial banks have announced an increase in transaction fees of 18 per cent effective today.

Stakeholders say the increase threatens to reverse gains made in financial inclusion in the country.

Banks have announced that fees charged on services such as withdrawals would increase following the government’s decision to impose 18 per cent value added tax (VAT) on the charges.

The government is targeting the billions of shillings banks have been earning in transaction fees, but, as expected, the additional cost has simply been passed on to customers.

This, in turn, would increase the tax burden on low income earners, making banking a costly undertaking, according to stakeholders.

Records show that the five biggest banks raked in Sh58 billion in fees and commissions in the first three months of this year, making the earnings a significant part of their profits.

The government has also introduced a 10 per cent excise duty tax on mobile money transfers, leaving people with no viable alternatives.  Previously, only mobile withdrawals were charged.

Mobile money helped to bring the majority of the unbanked population into the financial network, thus increasing financial inclusion to 40 per cent from 17 per cent in 2011, according to the Bank of Tanzania (BoT).

Transaction fees are charged on various banking services such as the depositing or withdrawal of cash, balance inquiry, ATM use, ATM card issuance and the transfer of money among banks or to mobile platforms.

The charges usually range from Sh250 to Sh20,000, or slightly more, depending on the type of services and bank policies.