adminBanks and other financial institutions continue to impose exorbitant and extortionist interest and related charges on their clients.
These high and unsustainable expenses are without doubt some of the major reasons behind the emergence of high levels of non-performing loans (NPLs) across the whole fabric of the financial services sector.
The well-respected and internationally-acknowledged dictum of non-deplume, which is also locally supported by a High Court ruling, is being wantonly violated in numerous instances with apparent impunity.
Interest computations and calculations, which are now generally computerised, are run on flawed software programmes.
Interest is being compounded, almost on daily basis, then capitalised and thereafter more interest is charged on interest, which may, in itself, be illegitimate.
This often times results in exorbitant interest expense to the prejudice borrowers and unjust enrichment of banks and other such lending institutions.
The decades-old and legitimate tenets of simple interest calculation have long been abandoned, ignored or simply dishonoured and disregarded by most lending entities.
Here, I present two cases to illustrate the point.
The one case relates to me personally and the other to my favourite local football team – Dynamos.
I borrowed about US$75 000 worth of capital over three years, almost all to exclusively finance agriculture inputs and other working capital requirements at my farm just after the introduction of the multi-currency system in 2009.
Roughly over six years now, the oustanding amount has ballooned to a massive US$310 000, according to the latest bank statement I received, and this is despite credits (repayments) that reflected on the statement during the period in question.
From my meticulous analysis and that of the bank, too, included in the outstanding balance is an amount of not less than US$220 000 (about three times the capital borrowed, contrary to the non-deplume concept) that relates to interest specifically and exclusively charged by the bank.
In the financial year ending December 31, 2014 alone, the bank levied a massive interest of over US$75 000 (equal to the original capital amount on its own), much to my horror and surprise.
I will not mention here the name of the specific bank involved to protect its integrity.
However, my experience with other local banks has been no different, if not worse.
A financial institution – according to Press reports – also lent Dynamos about US$190 000 to enable that formidable football side to finance its participation in an African football clubs competition, also just a few years after the adoption of the multi-currency system.
The same debt was reported to have escalated massively to over US$400 000 despite claims by Dynamos that it had liquidated a substantial amount, if not all of it, by way of cash repayments.
Obviously, the balance now outstanding is constituted mainly of bank interest and a relatively small portion (going by my own situation) of other charges, in the absence of further major borrowings of a capital nature by the club.
The bank was then to attempt to attach the team bus and impound gate takings from home games, after enlisting the services of the Messenger of Court and securing a court judgment in the matter.
Such ruthless, inconsiderate and reckless actions by the banks and other financial institutions can easily be viewed – with a lot of justification – as direct sabotage to the Land Reform Programme, in my case, and as a threat to the small and medium enterprises sector.
Many SMEs have collapsed, and big corporates have not been spared either. If such actions by banks and other lending institutions are left unchallenged legally, they will continue to threaten the economic well-being of the nation.
It is in this context that I intend to challenge these retrogressive and unjustified actions in the High Court, and this will be in the national interest.
Online Reporter