Until this year, the banking sector in Uganda remained one of those areas of industry held in high esteem and incapable of wrong. Mere mortal Ugandans only ever approached banks when they absolutely had and the word of a bank manager was as respected as a doctor’s.
That is until businessman Hamis Kiggundu took Diamond Trust Bank Uganda Limited, alongside its sister bank in Kenya, to court over Uganda Shillings 120 billion. Kiggundu claimed that over a ten-year period, the bank had siphoned the money from his accounts.
Many doubters thought the bank case was a trick by the young businessman to gain time to fix his debts with the bank.
That all changed now when Justice Henry Peter Adonyo ruled that the credit facilities DTB-Kenya offered to Kiggundu are illegal since it is not licenced by Bank of Uganda as required under the law to carry out financial business in Uganda.
Adonyo said the banks which were represented by city lawyer Kiryowa Kiwanuka needed to be penalized for their illegal actions and that they did not have any defence whatsoever for withdrawing the businessman’s money without his consent yet he had fully paid the loans. Adonyo ordered the two banks to refund all the money that was illegally taken from Kiggundu’s accounts amounting to 34 billion shillings and 23m dollars (85 billion Shillings) immediately.
The judgment has been received with much excitement. The once feared all powerful banks stand demystified in the eyes of Uganda. The aura of invincibility broken forever by the loss in this court case.
For years, there had been rumours that sometimes employees in banks tamper with customers accounts etching away negligible amounts which do actually add up when they are picked from thousands of accounts with in the bank. Take a case of where a few employees choose say to deduct just sh.1000 from 50,000 accounts with in a bank quietly, that’s a comfortable 50 million shillings that may never hurt anyone.
Enter the loans and it gets worse. Not once or twice have we seen aggrieved customers of banks cry out on national TV over failure of banks to return their securities after loan repayments have been completed. It is worse with the smaller loans especially taken out from the smaller banks, micro finance institutions and MDIs.
There would be disputes over repayments. A customer would complain that a bank had secretly created additional payment demands and costs not agreed on at the time the loan was being taken.
The alarmist approach of the bankers association condemning a decision of court in a public document and an earlier one asserting that their member bank could do no wrong goes on to show how much the dirt in the banking world has been smothered over time given the self regulating nature and near closed cartel system the players operated in.
The removal of the 30% blockade of any disputed amount which a customer must deposit before taking on a bank over disputed loan repayments in court was a good one and paved way for the banks to be put to the sword when need arises; something the law had long denied customers.
Bank of Uganda as the regulator seemed entirely absent as the commercial banks tussled and arm-twisted their disgruntled clients.
Thankfully, the courts have opened our eyes that the banks can be floored by the law and many more customers who feel aggrieved and have a solid case against their banks especially aggrieved borrowers should follow Ham’s example and take on the once believed to be untouchable commercial banks in court.
As the appeal process gets under way pushed by a panicky and alarmist bankers association that was shocked one of its own was caught offside by the law, whichever way it goes, the system has been ‘undressed’ and more people should dare to correct the excesses of the banking system against them by seeking legal redress.
The Author is a senior analyst and media strategist at consulting firm Brothers IntelligenceLLC
Twitter:@Michaelkanaabi WhatsApp:+256701133509 Email: [email protected]