Today I read with much sadness the remarks by the Reserve Bank of Malawi (RBM) boss about exorbitant interest rates our financial institutions in Malawi charge their customers.
Perks Ligoya made the remarks when addressing experts and chiefs from the lending institutions from across Malawi in Lilongwe. He told microfinance institutions to stop “stealing from the poor”. The banking regulatory chief was referring to the high interest rates which banks charge in Malawi.
Addressing the conference, Ligoya threatened to take legal action against lending institutions if they continue charging very excessive interest rates (so he knows about the excessive interest rates and he has done nothing about it).
I am sad to say that I am not persuaded that Ligoya’s remarks will go to any length to change the status quo. It is my opinion that what Ligoya said were empty threats, mere rhetorics to mark the official opening of the conference.
Malawians will continue to suffer at the hands of the banking sector in Malawi unless his regulatory body wakes up from her deep slumber and do what she is supposed to do – regulate the financial institutions.
Banknet
I will use my personal banking experience, albeit in a small way, to illustrate the national responsibility the RBM owes ordinary Malawians like me.
I use the National Bank of Malawi (NBM) online banking service called banknet. If you are in diaspora and want to monitor your riches home the facility is jolly good and I recommend it. Of course there is a cost to it - K550 every month. Yes, the bank charges for internet banking services!
Banknet claims to offer subscribers to its online service a number of facilities. Some of the services include online utility bill payments and online cash transfer services. Furthermore, the bank offers online fixed account services. You can create a fixed bank account and terminate it online.
My experience though is that every time I cancel a fixed bank account online my transaction never goes through. I have to phone the bank several times, at a very high cost, for my request to be implemented. Unfortunately this is a general trend for most services - one has to sweat to get any service done by the bank.
The NBM inefficient online services for which I pay K550 every month sharply contrasts with my UK efficient online banking services for which I pay nothing.
Who is to blame for crap banking services and the numerous unreasonable bank charges? Certainly I can’t blame the greedy bankers. I do not expect the bankers to play judge and jury at the same time. I blame our sleeping regulator – the Reserve Bank of Malawi.
Rules, Compliance and Enforcement
The Reserve Bank of Malawi has failed to adequately monitor and regulate the banking sector and/or alternatively she simply has failed to enforce her own banking rules in the country.
When it comes to being regulated, the banks in Malawi enjoy a free ride. They have been left free to prey on the poor Malawians. Consequently the little hard earned cash of Malawians ends up in the pockets of the rich banking gurus through unfair banking fees.
It is shocking that despite the banking sector in Malawi having a very small clientele, every year the sector makes the highest profits in the country. This is largely due to the unregulated excess interest rates and inappropriate exorbitant bank charges.
It must be the role of the regulator to ensure that the banking services in Malawi are performed according to guidelines prescribed by the regulator. She has the duty to ensure that bank charges and interest rates are reasonable.
Further, the regulator has the duty to implement effective complaints-handling procedures. RBM has to formulate clear ways that ordinary people and companies can feed bank to her on the services we get from the banks with a view of speaking on our behalf to the banks.
The financial regulator has the legal and moral responsibility to come out with clear and fair rules for the banking sector in Malawi. The regulator has to ensure compliance of the rules. Where there is a breach of the rules, the regulator has to punish the offender and award appropriate remedies to the victim.
My groanings for the banking sector in Malawi were far from being comforted with Ligoya’s remarks. Malawians do not need empty conference threats against the bankers. They want to see the RBM actually doing its job - regulating the financial institutions in the country.
I am looking forward to a day when the regulator shall wake up from her sleep and help Malawians enjoy their hard earned cash then shall I wipe my tears.
An incompetent regulator is a danger to services.
2 comments:
No wonder banking is the only economic sector that makes astronomic profits in Malawi. Take a look at my 2008 article and the comments that ensued at this link: http://nthambazale.com/2008/08/banks-milking-off-clients-in-southern-africa/
very wise groanings mate. This subject is very important, however, our banking regulator is indeed asleep as you rightly put it.
I must also say that the bank does not listen to its customers. I guess they are too big. I visited National Bank the other day to ask for a mortgage. I was told that for them to give me a mortgage, I had to ask my employer to send my salary to my account at National Bank. This was after I had told them that I do not live in Malawi. Creativity is non-existent at this Bank. If I were them, I was going to see the opportunity to change some of the policies in order to introduce a mortgage facility for those in the diaspora.
So instead of driving revenues via innovative products, they achieve their profit targets through exorbitant fees for a service that is mediocre.
I have no words for Malawi's banks, their regulator and of course I have no confidence in the leadership of the country anyway.
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