How the banks punish the poor

This has not been a good few years for the banks publicity wise. Sure, they are still making money hand over fist but it is being tolerated less and less as time goes on.You can look through the Namibian’s SMS page on any given day and find people who are just losing their cool at the service level.
Take for instance this message of last Friday.

*FNB advertise vacancies and the only way to apply is online. I have tried in vain to register but could not upload my CV and qualifications. Why all the hassle and trouble to register? Make your accessibility more friendly and easy, or provide alternatives.
A few of our readers get downright Shakespearean with telling it like it is;
*STANDARD Bank Namibia Ausspannplatz branch, it’s not rocket science. There’s enough computers, you just don’t have enough people to operate them. Don’t you see long queues every day? Something doesn’t add up. By the way, your service are rotten. Prove me wrong. I’m tired of queuing and need service as it was when people were employed with standard eight and 10 qualifications. Come on, I know you can do better, I hope it’s not only me!
Part of the hostility stems from the dual role of banks who, on the one hand preach the doctrine of the free market and the gospel of capitalism but on the other hand they are a convenient tool for state policy to create credit, and require state support during times of crisis.The logic of banking is not the same as the logic of development although unfortunately the two are conflated often. The logic of banking is, quite simply, to maximise their profit level. The banks themselves, see their role as maximising profit for shareholders.
Banks have a way to make their money from every customer who comes through the door. For the affluent, the banks use their money to invest and thus secure a return, but what of those who are not wealthy, how does the bank make a profit from them?
Fees are one way. Those clients who do not have a lot of cash for the bank to play with are punished by fees and charges. Rules will stipulate that unless you carry a certain balance forward each and every month will be subject to things such as overdraft charges and high levies for small infractions such as insufficient funds. If one thinks about those charges they will realise that these high charges are only levied upon those who live paycheque to paycheque. It is not the rich who worry about a charge for insufficient funds or, frankly, usurious rates on overdraft ‘protection’.
One of the major problems with this, of course, that the poor pay much higher banking costs than the rich, and end up being burdened by the high costs of living day-to-day.
What happens when citizens, due to an illness or a mishap at work, become unable to meet an obligation? The banks, often without being requested, provide overdraft ‘protection’ to their clients, once in debt, pushes many into a cycle of debt which they cannot escape from due to the high interest rates on the overdraft account. When the family are then unable to pay, the bank closes their account. Once a person has had their account closed by one bank, other banks also will not be likely to help that individual open another account – thus stranding them outside the formal banking system.
The difficulty of saving money without a bank account – coupled with difficulty accessing credit or insurance, this means that the poor and unbanked, if a crisis arises, like a death in the family for instance, are left without a safety net. It then becomes near impossible to qualify for a bank loan or credit without record. As a result, they are forced to rely on payday lenders (cash loans) and pay exorbitant rates.
In Addition to this, there is the fact that banks, and other businesses, only open a branch where there is sufficient population to support the bank. The result of this is that cities and towns will get an outlet but it leaves the rural areas underserved.
Savings are needed to simply survive week to week. According to World Bank statistics, households in the lowest third of the income scale at times spend as much as 90 per cent of their consumption budget on food, yet they still often go hungry. The poorer, more risk-averse, and vulnerable a household is, the more important precautionary saving becomes.
*STANDARD Bank, when are you going to upgrade Khorixas Branch? It was a colonial era arrangement to make it an agency for Outjo and it borders on economic starvation for Khorixas.

*Disclaimer – Rob Parker is a partner in Axon Mobile Technology Holdings, which can provide banking services to the poor for free.