[2008-05-08]  Profits Should Help Banks to Cut Rates
A majority of the banks have published their results for the year 2007 indicating a surge in profits by double digits (Daily Monitor Tuesday, May 6, Pages 22/23). That's good news, but as of now it's only limited to the banks and the shareholders.

On average ordinary Ugandans especially salaried workers, who have been credited for being one of the biggest block catalysts to the rapid growth of the sector through acquisition of salary loans as well as large sections of small scale business people, continue to suffer exorbitant interest rates.


In many of the banks, interest rates have remained at an average high of between 20 and 29 percent per annum. The borrowers, especially salaried workers are choking with this high interest as the banks smile all the way reeking in double digit profits. The high interest rates make the banks appear like modern day Shylocks.

Lately, the Ugandan banking public has also been subjected to various bank charges some of which appear dubious and we worry that these in part also explain the good returns the banks made in the year ended.

On the overall, we cannot be seen to envy the banks on their good tidings but it is important that the Ugandan banking public that helped contribute to these good returns shares in the happiness, not through phoney commercial promotions only aimed at getting more people to deposit in a particular bank and nice adverts but improved and more affordable banking services.

With this kind of returns, it is not beyond the banks to significantly scale down on the interest they charge. The unexplained bank charges is another area both the banks, their association (Uganda Bankers Association) and the regulator, the Central Bank must look into and address immediately.

The banks also owe it to Ugandans to use their huge profits to improve their services especially the Automated Teller Machines (ATMs) that have recently been a nightmare for many customers and the painfully long queues.

If the banks can use their profits that way they stand to gain double victory-- reduce the pressure on their small clientele base at the moment and motivate people to borrow more and get new borrowers.

Lastly the banks need to be more innovative, cut the red tape especially on life transforming schemes like mortgage financing to allow more people own a home or other assets. The good profits can afford them this

Source: allafrics