Which way for banks’ “orphaned consumers”?

03Mar 2016
Assumpta Nalitolela
The Guardian
Back to principles and standards
Which way for banks’ “orphaned consumers”?
  • Supervision of banks and financial institutions is just a subsidiary function within BoT and protection of the customers of those banks is limited to the protection of their deposits in case a bank winds up.

You know what; if I had money and the requisite expertise in running a bank and a merciless heart that takes advantage of unchecked situations especially those concerned with protection of customers, I would have invested my money in the banking sector...!

Instead of asking me why; first just watch the mushrooming of banks and financial institutions and even unregistered money lenders in this country.

Ask yourself why is it that both internal and external investors don’t want to invest in fish processing and packaging or in shoes, clothing, or farming ventures?

I don’t know their reasons but mine is that I would go for this business because financial consumers are orphans hence no one takes interests to oversee if they are being fairly treated in business or not. You know you cannot mistreat a child whose caretakers are there watching every step you take towards that child.

Still in the dark? What I’m saying is: mistreat the energy and water users, you will have the consumer consultative commission of EWURA to answer to; the same goes to the surface and marine transport users, and others.

All these have regulatory bodies that protect consumers from unfair and misleading markets’ conduct.

Now, who is there to protect financial consumers? Don’t tell me it is the Bank of Tanzania (BoT), because I will differ.

Supervision of banks and financial institutions is just a subsidiary function within BoT and protection of the customers of those banks is limited to the protection of their deposits in case a bank winds up.

I’m not suggesting that now BOT should take up the consumer protection function of the banks that they supervise; no, this would be derailing the bank from its primary functions. What I’m advocating for is an independent regulatory institution that will protect financial consumers form unfair treatment they get from banks.

Just think of this: you have a savings account; the interest rate that they will pay you will not exceed five per cent for most banks, but they will use your money to lend to someone else and they will get a good 20 per cent on the money lent.

Just look at the spread. Nobody seems to notice that this is unfair to these orphans.

Imagine the public shouts at those middlemen who buy crops from farmers at very low prices and resell the crops at exorbitantly high prices. Such middlemen are given all sorts of bad names like ‘walanguzi’ (racketeers) etc. Is this not what the banks are also doing?

If that is not enough, the account will then be subjected to a monthly fee-a commission every time you withdraw money from ATMs of some banks and commission for a monthly statement of the account.

Surprisingly, other banks will charge you for not transacting in your account! So, if you do not deposit or withdraw money for some time, some banks will charge you for what they call ‘dormancy fees’. So you leave 200,000/- in your account, hoping to find a swollen account when you get back only to find a nil balance!

Don’t get surprised it is these fees, I mean the charges or the commissions that are responsible for siphoning your money from your account to the very people who gave you sweet words like “don’t keep money in your house.

It could get destroyed by fire, burglars may steal it, rats may eat it and you won’t earn anything”! What’s the difference?

To me, the bank charges are the rats, the burglars and the fire that consumes depositors’ money. There is a need of putting a balance in this precious banker-customer relationship. Who will put the balance in the absence of a regulatory body?

Financial consumers need a regulatory organ to even force banks to provide adequate information to the consumers before receiving any service.

Information on what charges will pass through the account, how interest is calculated gives customers an opportunity to make better decisions on whether to bank their money in that bank or other banks or even invest elsewhere if the customer finds all banks as weaker choices.

If you cannot grasp what I’ m talking about here; then go to one of the banks and request to open an account.

One thing they will ask you is: what type of account you would like to open? As if the accounts are tangible goods displayed on a shelf where you can say I want this or that one.

Contact me so that I personally congratulate the banker if you will find anyone who will tell you how the interest rate will be calculated, the various charges that will pass through your account or even whether you are entitled or not to get a free monthly statement on a date of your preference.

I know that very few if any will volunteer for such information. A regulatory organ is therefore required to make it compulsory for the banks to reveal such information.

After all, the right to get informed is one of the basic rights of a consumer as provided in the Fair Competition Act, 2003 of Tanzania. I believe a financial consumer is also covered.

The author is a veteran banker currently working as a part time lecturer at Stella Maris, Mtwara University College, a constituent college of the Saint Augustine University Tanzania.
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