The national financial system is highly concentrated, until December 2019, the three main commercial banks (Millennium BIM, Banco Comercial de Investimentos and Standard Bank) controlled around 70.7% of total deposits, 60.4% of credit to the economy and 66.7% total assets of the national financial system.
Despite the existence of Ministerial Diploma no. 23/2018 of February 2, which approves the regulation for the management of State bank accounts, the process of domiciliation of State funds with commercial banks seems not to be based on a public tender and most public institutions have autonomy in choosing banks to house your accounts.
Consequently, the State's financial operations regarding the capture of tax revenues and other deposits are mostly¸ domiciled in the main commercial banks. This fundraising gives these banks an exceptional advantage in managing profits with funds at virtually no cost to them, which suggests that there may be a privileged relationship between the main commercial banks and the Mozambican state.
A noteworthy aspect is that the lack of such transparent procedures in the domiciliation of state funds creates a space for corruption in the financial system, as many commercial banks have attracted deposits through bribes to decision makers of public institutions. This practice, which is ingrained in the Mozambican financial system, influences the cost of granting loans because these bribes are charged to the final consumer.
In addition, another bottleneck that benefits only commercial banks in the square is in the state fundraising phase, which allows banks to use State funds to acquire Treasury bills issued by the same State¸ entering a vicious cycle that generates significant profitability and zero risk for financial institutions that are better positioned in the market.
These associated factors weaken the transmission mechanism of the Bank of Mozambique's monetary policies, indicating the need to introduce mechanisms aimed at stimulating competitiveness by reducing the concentration of State resources in certain commercial banks. These mechanisms will also contribute to the reduction of credit risk.
Therefore, it is urgent that, given this situation, transparent procedures are implemented. For example, through a public tender for the allocation of State funds in the banking system and thus allow healthy competitiveness among banks. It is important that there is a "level playing field” to ensure that the recipients of state deposits are not just the banks but also the borrowers. The fact of using funds with low costs should result in access to credit in commercial banks with an interest rate structure more beneficial to borrowers, which is currently not the case.
