49. Post office savings banks in many African countries are on the other hand characterized by a number of weaknesses compared to commercial banks and other financial institution. Some
of the weaknesses are:
limited range of services;
low interest payment on deposits;
under compitalization of banks;
poor quality of services;
lack of decent and proper facility (accommodation).
low limit of withdrawal and low maximum deposit;
indirect communication between the bank management and its customers;
low level of promotional activities.
50. The weaknesses are partly caused by the policy of African Governments towards postal
banks. Most of them were introduced as a single purpose savings mobilizations institutions.
Their mission was to accept deposits of small savers and invest them in Government securities.
Therefore, it is very unlikely to expect postal banks to compete with large commercial banks with highly diversified saving, borrowing and lending operations and a varied supply of services in insurance, real state and foreign banking transactions. But now a days the trend is changing in many African countries. Some of the postal banks are either reorganized or on the process of reorganization. For example in Tanzania the post office savings bank is already transformed into a share company. In Zambia, the National Savings and Credit Bank is operating for the purpose of winding up its affairs in readiness for takeover by post bank limited on the date yet to be announced by the Minister of Finance.
51. In general, the performance of post office savings banks faces a very strong competition from commercial banks and other financial institutions. Considering that they provide only the traditional savings account services, the task ahead is to improve the existing services and examine possibilities of offering a wide range of banking products and other savings schemes and credit to make postal banks more relevant and responsive to the changing needs of society.
CHAPTER IV
PROBLEMS ENCOUNTERED BY POST OFFICE SAVINGS BANK IN AFRICA
52. Post office savings banks are well used by the lower income group of the society particularly where the commercial banks don't have branches. Even in the largest cities due to its extensive network, procedural simplicity, accessibility at hours outside normal business hours and possibility of withdrawals and deposits at any of the post offices; they are well used by the household sector. But that doesn't mean that postal banks are operating without any problems.
Today, they are faced by a number of problems. Many of the problems have been indicated in the preceding parts of this study as a passing remark. However, some of the major problems of postal savings banks in Africa are summarized in the next paragraphs.
4.1 Problems related to ownership and status
53. Owned by the treasury or Ministry of Finance and run by either posts and
telecommunications corporation (PTC) or independent postal bank management, what most postoffice savings banks encountered was due to duplication of authority between the PTC, Ministry of Finance and post office bank management. Particularly in countries where the post bank is administratively integrated into the postal administrations, this form of organizational arrangement results in contradictory assignment of decision making powers and monitoring of rights and obligations. Decisions regarding management and operational problems of the bank will take a long time before it gets solved. In most cases, the agency agreement between the bank and posts and telecommunications corporation is outdated. A new agreement fair to both sides should be negotiated. The relationship between the bank and the post should be clearly indicated on the "Principal - Agent" agreement which incorporate the obligations and rights of each party concerning remittance of deposits, level of reserve, form and terms of remuneration
and transfer of documents.
4.2 Lack of adequate working capital
54. Acute undercapitalization (case of Zambia and Tanzania post banks) or no capitalization (Uganda post bank) remains the core problem of post office banks. This problem has given rise to other problems directly or indirectly such as, using depositors balances to finance the purchase of fixed assets (office equipments, computer, office buildings etc) which inturn resulted in a reduction of investment income, (the bank's major source of income) and liquidity problems and serious annual losses.
4.3 An inefficient and unreliable data processing system
55. Lack of computerization or dependency on PTC computer systems creates a problem in upgrading customer records. The processing of the bank data, such as, updating the customers balance, calculating interest payments and replacing a pass book in case of lose continued to be slow mainly owing to inadequate data processing facility. This problem is very serious in
Uganda post office bank where the customer accounts and other records are in arrears since
1981. This is the major cause of customer dissatisfaction with the service such as inability to credit interest at the end of the accounting year and to deal expeditiously with cases of lost pass books since they do not have up-to-date account balances.4.4 Limited range of products and services
56. At the moment, post office saving banks in African countries are offering limited range of products, mainly, the ordinary savings pass book account and fixed deposit accounts. They do not provide other savings schemes nor credit/loan facilities to their customers. This leads to the loses of some customers to other financial institutions which can assist them better. As a result, the bank loses the commission/interest that it would have earned if it had a wider range