One of the hidden charges banks have been levying goes by a very imposing name viz “Deposit Mobilization Fees ( DMF).
The fee was originally levied to customers who issued cheques without enough or sufficient funds in their accounts hence occasioning them to overdraw or go into debit balance.
The argument then was that banks would be forced to “mobilise” or in lay terms to “look” for the funds elsewhere to bail you out. This was understandable because the credit was not planned and secondly it was to penalise customers who did not put their finances in order.
Over time, the banks found the honey pot too sweet and extended this charge to all customers who knocked on their doors to take loans or overdrafts. The fee started at a rate 0.25 per cent per year but now it’s at 2-3 per cent per facility and still going up!
Not satisfied, the banks recently started charging the fee to borrowing customers holding savings or long-term deposits in their accounts. For the latter group, its like lending your car to your neighbour but who insists you fuel it for them!
In case you place a loan request but you don’t want to touch your savings lest you deplete them - banks will charge you DMF to fetch the same money to lend you!
This levy does not make sense because banks are known to hold deposits from customers sometimes far in excess of loans, in line with prudential guidelines, hence are cushioned from unanticipated shortfalls.
Secondly, banks collect money everyday in form of normal deposits and loan recoveries - so where is this that banks want to “mobilise” funds from? From their coffers?
We are not talking about loan facility administration or processing fees which they still charge separately.
To make matters worse, customers who overdraw their accounts are now not being charged “mobilisation fees” as originally envisaged but a new class of charges christined “overnight fees“ ranging from 0 per cent to 10 per cent per night!
For example If a customers overdraws their accounts by say Sh50,000, the banks will swiftly charge them a cool Sh5,000 per night.
The Central Bank of Kenya should seek explanations from banks to justify the multiple unapproved charges being levied on borrowers, which is on top of the loan interest.
To be fair, banks should revert to the old one-off administration fee of less than 0.25 per cent in processing loans but for non-depositors only. Alternatively, all cost banks incur on loans should be collapsed into the loan interest rate using scientific models.
Joe Musyoki, financial auditor, Kitengela
Let’s accord Kiswahili the respect it deserves
During an ICPAK seminar last Wednesday at the Hilton Hotel, CPA Joseph Wambugu had been slotted 10 minutes in the programme for an “Art Piece Presentation”. When he came to the podium, he did not disappoint.
He recited a Kiswahili poem (shairi), which was deep in its theme. He hailed the virtues that people have and condemned the injustices that a number of people commit. The flow was colourful and I wished he could go on and on.
If I got it well when he was introduced, he is based at Mount Kenya University in Thika.
Mr Wambugu did not forget to mention that Kiswahili has not been accorded much respect over the years.
Githuku Mungai - via email