An Open Letter to the Bank of Ghana: The Hidden Burden of Loan Deductions and the Financial Enslavement of Borrowers
Dear Governor of the Bank of Ghana,
I am writing to bring to your attention a serious issue that has become a financial burden within Ghana’s banking sector, particularly at institutions like the GCB Bank PLC. As a concerned citizen, I feel you must intervene in a practice that has left many borrowers in distress, experiencing financial hardship, and in some cases, total ruin.
Esteemed Governor, are loans not intended to provide essential financial support to those in need? Yet the excessive fees imposed by banks transform borrowing into a daunting ordeal rather than a remedy. We must ponder: Are banks truly focused on fostering economic growth, or have they become instruments of financial bondage?
Understanding the Borrowing Landscape
Obtaining a loan is not a matter of desire; it is often a last resort for individuals and businesses in urgent need. Whether it’s a parent struggling to pay school fees, a patient requiring funds for emergency surgery, or an entrepreneur seeking to expand a venture, loans should be a means to achieve financial stability, not a trap that exacerbates financial difficulties.
Unfortunately, especially GCB Bank PLC., has embraced a predatory lending approach. Interest rates are already high, and borrowers face additional burdens from various deductions masquerading as processing fees, insurance premiums, facility charges, and other unclear costs. These deductions substantially diminish the actual funds accessible to the borrower. Pitifully, it makes it exceedingly challenging to resolve the issue for which they sought the loan.
Distinguished Governor, consider someone seeking a GHS 20,000 loan for an urgent medical treatment. Upon approval, the following deductions occur: Processing Fee: GHS 500, Insurance Fee: GHS 700, Facility Fee: GHS 800
Ultimately, the borrower receives only GHS 18,000-an amount that may fall short of covering their medical needs. Yet, they are still obligated to repay the full GHS 20,000 plus interest over the loan term. Where is the fairness in this situation?
Does the practice amount to financial exploitation? While banks claim to extend assistance, the excessive deductions indicate otherwise. Instead of alleviating financial burdens, they are deepening customers’ struggles and pushing them further into debt.
Are Banks Supporting the Public Good or Exploiting Borrowers?
The banking sector is meant to drive economic growth and empower individuals and businesses by providing accessible and fair financial services. However, banks’ current actions concerning loan deductions seem to suggest a focus on profit maximization at the expense of the very clients they profess to serve.
One might argue that fees and charges are necessary for banks’ sustainability. While that has some merit, the critical issue remains: Are these deductions fair, justified, and ethical? The current system, where borrowers apply for one loan amount but receive considerably less due to excessive deductions, is exploitative and undermines the purpose of borrowing.
Recommended Steps for the Bank of Ghana
As the entity responsible for regulating banking operations in Ghana, the Bank of Ghana (BoG) must act promptly to address this financial injustice. The following areas deserve urgent focus:
- Regulate and Limit Loan Charges:
The BoG should implement regulations setting maximum limits on various deductions like processing and facility fees. A borrower approved for GHS 20,000 should receive that full amount, free from unexplained deductions.
- Improve Transparency in Loan Agreements:
Many borrowers lack clarity regarding the deductions they will face. The BoG must require banks to offer clear, comprehensive disclosures of all charges before customers accept loan proposals, including detailed breakdowns of deductions and their calculations.
- Protect Borrowers from Unfair Interest Rates:
With Ghana having one of the highest lending rates in the region, if banks continue to impose numerous deductions before loan disbursement, interest rates must be lowered to create a more equitable lending environment. A fair loan system should benefit both banks and borrowers.
- Hold Banks Accountable for Excessive Deductions:
Regular audits of banks should be conducted to ensure they do not exploit clients through hidden or unjustifiable fees. The BoG should establish a consumer protection unit for customers to report unfair deductions and seek redress.
- Promote Fair Lending Practices:
The BoG must enforce ethical lending practices that prioritize borrowers’ financial health over merely chasing profits. Banks should also be encouraged to develop flexible repayment plans to alleviate borrowers’ financial pressure.
Conclusion:
The financial system should not serve as a mechanism of oppression. Institutions like GCB Bank PLC must realign their policies with the fundamental purpose of banking: to promote economic growth and ensure individual financial stability.
It is disheartening to see individuals seeking help from banks during tough times only to be met with additional hardship. If a loan intended for a critical emergency is rendered insufficient due to deductions, what is the point of borrowing? This practice is rightly termed financial enslavement. The Bank of Ghana has both the power and duty to ensure that Ghana’s banking sector operates fairly and ethically. It is time for decisive action.
The suffering of borrowers must be alleviated. Banks need to understand that their success relies on the very customers they are currently taking advantage of. A fair and transparent loan system will not only benefit individuals but will also foster national economic stability.
We urge the Bank of Ghana to intervene and restore fairness to the banking sector before more lives and businesses fall victim to these exploitative practices.
WRITTEN BY: WISDOM KOUDJO KLU, EDUCATIONIST/COLUMNIST
GREATER ACCRA REGION.
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