Fredrick Masiga
7 April 2008
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The jostling for customers and the anxiety of being out competed in the banking market place is quite visible today than ever before and sometimes peeling into a chaotic encounter among commercial banks.
For the current rush you could be excused for referring to some commercial bank as 'money lenders' - synonymous with the street Shylocks - as opposed to providing a whole basket of professional banking services to the public.
Commercial banks that were previously not known for courteous response to customers' needs, have all of a sudden become meek and humble knowing that every potential customer who enters into a banking hall could be swiftly taken away by a competitor once he is out of their hall.
After the entry of new banks in the Ugandan market and others lurking on the horizon, Uganda has 21 commercial banks in total, four micro-deposit taking financial institutions, hundreds of micro finance institutions - some briefcase - and thousands of street money lenders.
All these players are gate crashing on customers with application forms for a barrage of services such as loans, mortgages, opening new accounts, upgrading into 'customised' accounts and products such as Prestige and Excel, or offering specified financing for cars, home items etc.
Commercial banks have learnt the art of creating demand where it is not necessary from pharmaceutical companies; once upon a time a bold head was considered a normal physiological condition caused by genetical inheritance but then the drug makers realised that they could reverse that condition using a concoction of chemicals and so they made the drug and since then many bold headed people have fallen for it paying dearly to 'cure' a condition that is absolutely harmless.
The commercial banks have in the same spirit ingeniously 'customised' products sometimes with very little or no functional value except to heighten you self importance and in the process you pay for a service that you might have as well not needed.
Of course the endevours of some of these financial institutions are commendable because their activities create competition which is helping to enlarge and consolidate the banking population.
As more people become upgraded as the banked and bankable, the economy receives a much needed injection of financial resources that can be mobilised for onward investment in development initiatives.
The broader picture though, and where the customer is often left in the dark and therefore vulnerable to shrewd financial institutions, are the many undisclosed transaction costs and high interest rates to which they are exposed.
Most borrowers have often wondered why, for example, even if the agreed total repayment period is 36 months you still find yourself taking longer even though you have diligently paid your monthly installments?
Or why, your monthly standing order has remained at the same rate for 36 months even though you were told interest would be on declining balance? These are legitimate concerns that borrowers must get to understand before they sign for a loan for example.
Bank of Uganda needs to look into the activities of some commercial banks especially on the extent to which customers are sensitised about the contractual obligations meted upon them when they sign up for a commercial bank service or product.
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