There are some bad banks in Kenya, and some better ones. As a consumer affairs columnist, it gets wearing berating our poorest banks for their poor service. Because the reason they offer awful service is because they have no shame and no pride either. They don’t care. Even when they are named, they don’t care. Only the good banks care about that.
So, today, I would like to share some insights into why our very worst banks are so bad, and why they don’t care. But I shall relate this tale based on nameless facts. For, today, ladies and gentlemen, we shall enjoy the telling of the Tale of Terrible Bank.
Recently, I got a customer SMS from Terrible Bank, which I no longer bank with, but which is far too terrible to remove me from its customer announcement lists, or even, for that matter, to organise closing my accounts. Definitely, these are both steps way beyond its capabilities. Terrible Bank was excited to be launching a new customer service, providing same-day clearing on its own cheques. So, that is, a Terrible Bank to Terrible Bank payment was going to clear the same day.
Now, for all normal, regular, not abysmal banks, this has been the case for as many years as any of us can remember. In fact, if one of our own clients banks with the same bank as we do, that clearing happens in minutes. But, you know, Terrible Bank has a terrible time banking at all, so it got all excited about clearing its own cheques internally, which would start, it announced, from Monday March 11.
Only, this is Terrible Bank, so, oh no! Monday March 11th arrives and with it another SMS explaining that Terrible Bank won’t be able to start same-day clearing of its internal cheques after all, due to ‘technical challenges’.
And that’s Terrible Bank’s marketing. Or, it’s banking.
Or some mixture of the general journey it takes customers on, as we are all left wondering about which ‘technical challenges’ mean Terrible Bank cannot track down its own cheques paid in at its own branches in the same 24 hours (where do they all go in between time?).
Yet, actually, there really is a reason why Terrible Bank finds it difficult to clear its own funds. For in Kenya, there are two types of banks, for two different purposes.
The first kind, which happily we now bank with, exists to grow and gain customers, and make it to Tier 1 by attracting service-oriented customer. For these banks, customer service matters, albeit hard to achieve at consistent quality.
And then there is the second kind of bank, which have sometimes been put into receivership, or suspended, or sometimes, as with Terrible Bank, just carried on, which exist for the banking employees.
The barest cursory glance at such banks – despite protestations from the Central Bank that it was all hidden and they didn’t know – will demonstrate that their principle purpose is making loans to their own staff. Sometimes that’s directors more than staff. Sometimes directors plus friends of directors.
In Terrible Bank’s case, where almost any member of staff could borrow Sh6m at a swipe on repayment interest of just six percent when the rest of us were paying 18 per cent plus, the massive internal loan book really is to staff.
So, the bank exists to cover the cost of that huge pile of subsidised lending. Every service is expensive. The foreign exchange carries an extra margin. There’s no money for, or particular need for, super-duper fancy modern technology like account records that facilitate same-day clearing.
But whose worried? No staff ever leave – they can’t afford to. No one ever gets fired – how would they repay their loans? The bank, truly, is its own wonderful little self-lending Savings and Credit Co-operative Organisation (Sacco) eco-system, where the function of customers is to pick up the bill and cover the staff loan subsidies.
So what would free us from bank type 2’s? Oh, just the usual stuff – transparency, rules limiting the scale of subsidising staff loans with banking business, checks and balances on internal lending, just the normal stuff we don’t have. So we get Terrible Banks.