The Declining Consumer Confidence in Banks in Uganda

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The finest Sunday morning it was.  I had just begun my chores when I received a call from Yohanah, my longtime client’s only son. I did not pick up his call. I intended to return the call at 1:00 PM. He called incessantly.

Suddenly, I had an inner dialogue, “ It is not possible for me to meet Yohana’s father this morning. Adoniya will make the Will on Monday as we had agreed a week ago. At last, I picked up his call and informed him I was going to call later.

“Madam, you don’t have to. ‘It’s over for us..’ My dad, my dad, my dad… he has died filthy-extremely dirty, unpleasant and desperate…”, He wailed.

Yohana’s father, Adoniya had toiled hard and saved every penny he got with one of the top banks.

He intended to start up a farming project to support his family. Adoniya had been a stable and well individual. His plight was occasioned by the bank’s fraudulent-unauthorized withdrawal of all his savings from his account which deteriorated his health. 

The Financial Institutions Act, 2004 as amended, defines a bank to mean a company licensed to carry on banking as its principal business and includes all branches and offices of that company in Uganda.

Banks receive deposits, make loans and currency exchange, and provide checking and savings account services. They thus play a dominant role in Uganda.

According to the Uganda Bankers Association Annual Report of 2022, Uganda has 25 commercial banks, 3 Development banks and 4 credit Banks.

In Uganda, banks are regulated by the Bank of Uganda whose primary purpose is to foster price stability and a sound financial system to protect consumers.

A consumer, as defined by the Bank of Uganda Financial Consumer Protection Guidelines, 2011, is an individual, company, or firm who uses, has used, is, or may be contemplating using, any of the products or services provided by a financial service provider.


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A bank customer is one of the immediate consumers in the banking business. For a smooth thriving of the banking business, consumers should have confidence in banks.

Black’s Law Dictionary, 2nd Edition, defines confidence to mean trust; and reliance. It is faith or belief that one will act in a right, proper, or effective way.

In the banking business, trust is the conviction of a consumer in the creation or retention of a secure relationship with the bank or the reliability on the bank.

In the banking business, consumer confidence is depicted by factors that determine the initial choice and retention of a bank, and information and opinion that potential consumers access or hold before the start of and/or during the relationship with a bank.

The latter phase encompasses confidence factors that affect a further relationship or cooperation with a bank. It connotes factors determining the emergence, practice, and maintenance of trust by banks.

As echoed in “Consumer Demands, Banking Priorities, and Recommendations”, (Jim Marous, 2021), the components of confidence in banks include transparency and effective communication, being oriented toward positive customer experience, and delivering on promises.

Critical to note, is that consumer confidence in a bank is vital in the development of a business relationship; attraction of new consumers and retention of old ones, reduction of financial loss costs, transactional legal costs, and litigiousness.

It implies trust which bestows a significant edge over competitors in the sector.

Notably, consumer confidence in banks is a very delicate asset. Irvine Sprague, the former Chairman of the U.S Federal Deposit Insurance Corporation stripped bare the delicacy of confidence in banks that, “Bank confidence is a fragile reed”.

This is noticeably true for consumer confidence in banks in Uganda. In Uganda, consumer confidence in banks has proved to be a frail ledge, easily broken and destroyed.

In the late 1900s, banks began to attract a higher consumer market potential; with considerable progress in expanding outreach and access to financial services, mostly due to the sure confidence that banks had garnered within consumers and how consumers perceived them.

Currently, the confidence of consumers in banks has diminished to a state of banks “are thieves”.

According to “Financial Repression and Financial Reform in Uganda; UNCTAD (Division for least developed countries)”, (Martin Brown Bridge), the banking system in Uganda is among the weakest in sub-Saharan Africa.

Most banks are no longer loyal, engaging, and service-oriented toward consumers’ interests, a fact that has led to a sharp decline in confidence in banks.

Indeed, the breakneck pace of consumer insecurity in most banks in Uganda is real.

Over the years, the confidence of consumers in banks has been volatile. Most banks have established themselves as unstable, constantly losing clients’ trust and confidence.

They have aggressively exploited their position of dominancy at the peril of vulnerable consumers. Consequently, the victims of illegal/fraudulent banks’ actions are untold.

Undeniably, the conduct of most banks in Uganda is a typical manifest of the deceit and dishonesty that banking consumers have long endured. Often are incidents where banks, in pursuit of illegitimate financial gains, purposely predetermine fraudulent transactions on the consumers’ monies and properties.

Banks mastermind consumers’ losses, connive with third parties, conceal transactional material facts from consumers, engage in reckless lending to consumers, unlawfully surrender for use customers’ data and credentials, become privy to illegal transactions, and charge exorbitant-usury interest on transactions, all against consumers’ interests.

More so, paramount banking attributes of advocacy, trust, clarity, efficient service delivery, and overall customer experience have been ignored by most banks.

It is now an aggressive venture of financial brutality against consumers.

In Uganda, it’s a true-to-life experience that most banks target to build consumer confidence only at the initial stages of creating a bank-customer legal relationship. Most banks have proved that they aren’t an integral part of the community, looking out for the financial well-being of Ugandans as they portray themselves.

Very evident now is that the banking business is a ploy of ruthless – imposter banks preying on consumers who limp from one bank to another amidst their financial needs. Banks have indeed held consumers’ confidence-trust expectations in a dramatic theatre.

Noteworthy, banks have exploited the technology advancement and regulatory-policy slippages to erode the aspect of consumer confidence and trust.

The conduct of most banks in Uganda towards consumers has ultimately motivated consumers to critique the quality and essence of the financial brands of banks in Uganda. Further, it has put forth enlightenment to consumers that the banks’ financial slogans are a mere chant on paper, succeeded by lip service.

The conduct of banks towards consumers has perpetrated a perspective that in the end, “it’s all about banks”.

With the current shady attitude of most banks in Uganda, the evolvement of consumer demands and expectations, emergence and engagement of new channels and alternative entrants in the financial arena, the confidence of consumers in banks is under great threat.

The attitude of banks has caused a lack of trust and confidence in banks by consumers and a decline in banks’ reputations.

Despite the need for a better pace of economic expansion, and the desire to revamp investment, production, and supply in Uganda, there is resistance by some consumers to engage with banks for financial assistance.

Unfortunately, most banks are never willing to remedy incidents of breach of consumer confidence and trust. They shamefully abandon their desperate customers after “robbing them”.

This bank’s behavioral rigidity might result in constant court cases, limited access to financial services, financial incapacity, and winding up of companies and individual businesses, which implies derailed economic buoyancy in the country.

Conclusion

Nothing can be tailored to justify any bank’s conduct that adversely impacts consumer confidence. There are consequences and legal remedies for breach of confidence by banks. However, the law should be effectively legislated to address incidents of breach of consumer confidence by banks. 

The regulatory bank should also be equipped to compel banks to compensate victims of their breaches.

Nevertheless, that may be inadequate to restore the confidence and trust of the already bruised consumers whose financial liberties have been plagued by insecurity in banks.

Banks should reframe their conduct toward consumers’ interests, emphasize safety, effectively engage consumers to continuously build trust and confidence, and act in the best interest of consumers.


The Author is a Commercial Law Practitioner/Advocate.

For comments and inquiries, contact her at asasiraathens@gmail.com or Mob: +256 771 478 596.


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