Though the article did not specify which product/services attract high interest, the focus of my article will be on loans, which the banks offer to its clients. The primary objective of the banks is to make profit, undisputed, but this cannot be made out of people's desperation for cash. The people in this country are desperate because the majority of us were not raised on a bed full of roses and when you graduate from tertiary schools there is no where to start, but to approach the banks. Assuming you need a personal loan of P10,000 from the bank and you intend to pay it in three years with the interest rate of 28 percent. This is how the rip-off starts. The banks will add facility fee and credit insurance over the required Pl0, 000 before the interest is being calculated. That is to say:
Loan Amount P10,000
Facility Fee P750.00
Credit Insurance P1,500
P12,250
The bone of my contention is that instead of the bank charging you the interest on the P10,000 and pay interest of P4, 890.89 over and above the principal loan, the bank will charge you interest on P12, 250.00 and pay the interest of P5, 991.34 over the principal loan. The difference to this is P1,100.45 on interest.
Now go to the same bank and save P10, 000.00 for three years with the prevailing highest market interest of 9.5 percent on savings accounts. You will get total interest of P3,402 for three years assuming you will not withdraw any amount for this entire period because if you will, they will charge you for doing that. What is so pathetic about this, is that, when you try to pay your loan earlier than the initial specified period the bank charges you penalty fee for doing so. With the highest Return on Equity of 40 percent in Africa, our banks are not the highest paying companies in this country. With the current pay structure of the government, a graduate of Economies who works for the council earns far much high than his counterpart in the banking industry. The sad part is also of an employee of the bank who earns half of his colleague's salary in a South Africa, bank even though the report is showing that our banking industry is doing far much better than the South Africa, banking industry.
