Thursday, 7 March 2013

Understanding Banking

First printed in Consumer News Namibia magazine - Feb 2013 edition

Let me start by repeating the words of a friend who is a banker in Windhoek, “banking is the profession with one of the best marketing departments around. Imagine trying to convince the first customer that their money was safer with the bank than in their own hands, and best of all, which the customer would need to pay fees to deposit and withdraw their own money.”

Even now during the financial crises throughout the world banks are still succeeding in motivating clients to give them their money. Today, most of us feel safe with our money in banks because “we are many and government will not let it fail”. The term “moral hazard” is used to explain why we take these risks.

All over the world people often complain about banks. This ranges from bank fees, interest charged, to repossession of vehicles and homes.

In Namibia this is no different. The late Hon. Reinhard (Kalla) Gertze, Member of Parliament, proposed an investigation into the financial institutions through public hearings of the Parliamentary Committee on Economics, Natural Resources and Public Administration. They held public hearings on bank charges and regulations in 2006 in Windhoek. One of the submissions outlined why interest is charged.

Why is interest charged?
In the beginning of banking, interest was used to offset the risk of providing the credit to the borrower. There are four risks (hazards):
  • The costs incurred by the bank while providing the loan had to be repaid;
  • Inflation means the lender will be able to buy less for the money as time passes;
  • Scarcity – in other words once it is lent to a borrower at a specific rate, it cannot be used for another loan;
  • That the borrower cannot pay back the loan
Of these four, the only real difference the government can make is in reducing the risk of borrower’s inability to repay.

Being a client of a bank

Banks and their branch network is a convenience. We can put our own money into an account, send money to someone else, and apply for a loan. As consumers, we realise that we need the services of a bank to increase our money. In other words, we need someone else’s money to pay for things like a car or a house, or even start a business.

But there is probably nothing as frustrating waiting in a queue at a bank “waiting for own money”, or dealing with an employee who is rude to us when we need to ask a question. If you are a client of a bank you have five basic rights, as well as five responsibilities.  These should be seen as an agreement between the banks and the Namibian consumer on how we treat one another.

1.                  You have the right to be treated with respect and dignity.
This means every employee of the bank should treat you with dignity and be respectful of your cultural and gender. This also means they may not be abusive when collecting overdue monies.

2.                  You have the right to decide which services or products you want to use.
You need enough information on the banks products to be able to choose the right one for your needs. This means the bank employee may not pressure you into a choosing a product you do not want.

3.                  You have the right to receive clear, truthful and complete information – as well as the time needed to make your decision
The bank must give complete information and answers to all your questions so you can fully understand the terms and conditions of the services and products you choose. The staff member serving you must give enough of their time to ensure you understand the relevant information about the product. This should include information such as total cost of borrowing, cost of transactions, penalty fees (if any), and possible alternatives that might benefit you.

4.                  You have the right to be heard
You are allowed to complain. When a service does not meet your needs, or any of your rights have been violated, you have the right to inform the bank immediately. The bank should have a customer hotline that will allow you to provide them with feedback – and they will benefit from being able to deal with the problem as early as possible.

5.                  You have the right to privacy
Your personal information must be kept confidential between you and the bank employees dealing with your account. No one is allowed to disclose your personal information without your permission.

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