On Monday 5 November 2018 we published an article explaining how Stanbic Bank, a unit of Standard Bank of South Africa, is financially exploiting and enslaving thousands of miners working for Mopani mines.
We will soon explain how Stanbic is exploiting and stealing from other sectors of Zambian workers.
The expose on Stanbic’s exploitation of Mopani miners has generated a huge debate and brought out interesting issues. Two issues that has attracted out attention are (1) the recurring lie that Zambians don’t read but just sign documents, and (2) the argument that loan repayments fluctuate according to prevailing interest rates, inflation, exchange rates and generally the state of the national economy.
Both arguments are hollow and misplaced. Stanbic should just start respecting Zambians and do business ethically. We know that a bank is a business whose main purpose is to make money. But in making money, they don’t have to exploit people.
Let’s start with interest rates as an excuse for increasing the money a borrower is repaying. It is unjustifiable because, when a bank agrees to lend you money, it takes into consideration or factors and all possible eventualities or possibilities that might occur during the period of the loan. And these possible eventualities are covered or are supposed to be covered in the interest you are agreeing to repay. Interest rates by the central bank rarely change so much that they can adversely affect a loan where like in Zambia, the borrower is already repaying too much interest. Stanbic is an experienced bank and has been lending money for many years and in many countries. They can and actually do project and forecast what the interest rate would be in the next five or more years. If they don’t forecast, then they are useless. Thus, they make sure that from the interest they impose on you when you sign the loan agreement, they will get back their money and profit no matter how interest rates fluctuate. So, when they inset the clause about changing the monthly repayment, they are only doing what they do best: making profit out of an unfortunate situation. And why is it that when interest rates change, it is the borrower that should be adversely affected? The bank only derives benefits but is unwilling to share the loss.
Besides, loans such as the ones Stanbic gave Mopani miners without collateral are actually insured. It means, if the borrower fails to pay, the insurance company pays the bank. But in the case of Stanbic, there is also something fishy about their Insurance company. We shall publish the details later but suffice to say that Stanbic is either colluding with or cheating Bank of Zambia on its inhouse Insurance company.
ZAMBIANS DON’T READ BEFORE SIGNING LOAN AGREEMENTS?
We do not think this is true.
When a person goes to sign a loan agreement with a bank, Stanbic in this case, the borrower is in a very weak bargaining position. The potential borrower will be presented with standard application forms designed decades ago and he cannot change anything on that form. It is take or leave it. The borrower is expected to fit himself in those standard forms and adhere to the terms and conditions. Whether the person reads or does not read the forms changes nothing. The only thing a borrower can do is walk away and that is what the bank does not want to happen. The forms are written in legal and financial jargon such that even an educated person such as a doctor or mining engineer with have difficulties to understand, even if they read it 10 times. Even if you seek the services of an independent financial advisor, there is no guarantee that you will actually understand as Stanbic’s interpretation of the same terms and conditions could be different from your advisor’s. And how many Zambians can afford the services of a financial advisor? Those forms are designed to help the bank not the borrower. They are deliberately long and written in vague language so that when a dispute arises, the bank can interpret it in their favour. Remember the bank has been lending money for centuries and that is their daily activity; the bank is experienced and has the money, legal department and the technology. On the other hand is a machine operator for Mopani who is trying to borrow for the first time. He is alone, no lawyer, no financial advisor no experience and with limited financial information but he or she certainly needs the money to build a house for his family.
The bank is supposed to explain the salient points of its terms and conditions to the borrower in a language he/she fully understands so that he or she makes an informed decision. But banks do not do this because they know that once a borrower understands what the terms and conditions really entail, most will walk away.
This brings into the equation the role of the Bank of Zambia. Those people are supposed to monitor and supervise these banks. They are supposed to make sure that commercial banks simplify their terms and conditions so that potential borrowers fully understand before they sign. It is supposed to be the responsibility of the bank to make sure that the borrower understands fully what he is signing. This is what happens in other countries. But unfortunately, Bank of Zambia officials are just as corrupt as Stanbic. The problem is that most bank of Zambia officials have overstayed and need to be either retired or redeployed just like traffic police officers were moved to general duties by Stephen Kapyongo. The people at the bank of Zambia supervision department should be moved to security guard’s department. They have become over familiar and friendly with commercial banks. We do not expect them to charge erring commercial banks when they are all cosy with them.
In other countries such as South Africa, where the owners of Stanbic come from, banks are strictly supervised not just on paper but practically suchbthat there is no way Standard Bank can increase the loan tenure of a minet from 5 years to 10 years.
Well, if Zambians don’t read other things, at least they read the Watchdog.