I agree that Banks are not supposed to make losses on credit facilities given to their customers but it becomes a different story when banks start playing dirty tricks to fraudulently and systematically stress their clients to take over their mortgage security. We all need to realize that many of these Ugandans are pushed to the wall after getting loans with very high interest rates on top of other hidden loan costs involved which make it harder to fully service these credit facilities within the stated time.
This has been evidenced in the recent case where a Kampala renowned businessman Hamis Kiggundu sued Diamond Trust Bank Uganda and Diamond Trust Bank Kenya for fraudulently debiting his accounts without his consent while making their loan recoveries through charges on the same accounts. This prompted Ham through Ham Enterprises one of his businesses to drag DTB Uganda and DTB Kenya to court for the illegalities carried out by the Bank. Before we dive into the various reforms that have been proposed by Ham, here are some significant recent cases between business people and their banks;
Case scenario One
On 21st August 2020, Balya Mall, a building owned by Mbarara City businessman Apollo Barya Muhumuza was sealed off by court brokers in preparation to sell it after the owner allegedly failed to settle a Shs9 billion loan extended to him by Orient Bank. “Balya mall /stint hardware located on Mahembe Gente Mbarara -Masaka road , adjacent to Akiiki Nyabongo road defaulted on repayment of the loan and on 5th June 2019, the Orient bank served the debtor with a demand notice but he failed to comply ,on 16th August,2019 the bank again served the debtor with a notice of default and on 16-18 Nov,2019 the bank served him with a notice of sale.” Read the court statement. Sources close to Barya blamed his troubles having come from very high interest rates, a challenge that very many Ugandans face today.
Case scenario Two
A city businesswoman Ida May Kwesiga has in the past few days dragged Housing Finance Bank together with Balaji Group East Africa Limited to court for fraudulently and illegally selling her property located at Kyadondo Road despite presidential directives stopping real estate transaction during the lockdown period.
Like many other business people that have fallen prey the scavengers in Uganda’s Banking industry, Kwesiga was given a credit facility based on very unconscionable terms. Her property was sold during the COVID19 lockdown without being given an opportunity to be represented by an independent financial advisor. Kwesiga decided to sue the bank on grounds of selling her property at a low value, not advertising the property and failure to issue new notices to her.
“The first defendant (Housing Finance Bank) without re-issuing default notices, re-advertising or re-evaluating to ascertain the current market value proceeded and sold the suit property to the second defendant (Balaji Group East Africa Limited). The plaintiff has just come to learn that the property was sold to Balaji Group East Africa Limited despite having a court order and being aware of the current Covid-19 situation that has affected the entire economy,” stated the court documents.
The above two cases are the most recent notable ones but the fact is thousands of Ugandans have lost their businesses and property to banks under fraudulent and illegal ways. Many of these Ugandans could not even come up to sue these banks because of the inconsiderate Section 13 of the 2012 Mortgage act that requires the aggrieved party to pay 30% of the amount in question before the case is heard in courts, a section that Hamis Kiggudu grounded in his case against DTB Uganda and DTB Kenya. With the above examples of individuals struggling with the unfair treatment of bank borrowers by the Banks, all hope is not lost as the proprietor of Ham Enterprises, Hamis Kiggundu has come out to suggest some cardinal banking reforms that need to considered if our banking industry is to perform better. Here are some of those reforms;
- Revising the structures of foreign banks in the Ugandan economy by employing Ugandans to take some key positions in these banks than having all key positions filled with foreign directors who do not have a clear picture of the needs of budding entrepreneurs in Uganda. We all need to recall that close to 95% of Banks in Uganda are foreign banks.
- Put in place systems that protect Ugandan business men and women from being segregated, discriminated and given unfair interest rates on top of delayed loan processing time compared to foreigners doing business in Uganda.
- Banks operating in Uganda should have partly local Ugandan ownership in their shareholding with a reasonable number of Ugandan directors that seat at their board of directors with direct involvement in decision making from the top to cater for Ugandan interests as a country.
- Control the repatriation of profits by foreign banks to their parent countries which means that Uganda is used as a conduit.
The above reforms are very necessary and need to be given reasonable attention based on reality as expressed by businessman Hamis Kiggudu. On top of the reforms, its high time Ugandan bank borrowers started being protected or else we risk losing jobs and employment that these business men and women provide to Ugandans hence curtailing growth and development.
By Mwebya Fred, a Finance Student and a Digital Content Creator.
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