Date: January 21, 2019
Source: The National
Article Views: 171
THE European Union is concerned about the rise of informal financial institutions offering quick lending services and is calling for sticker regulation.
“Actually, I have heard that there are many opportunities to borrow for money but at huge cost,” Rene Mally, first counsellor, head of corporations, European Union, said during launch of the Mama-Bank access point official rollout pilot project in Port Moresby last week.
“I think we all need to make a bigger effort for sticker regulation of this totally exploitative practice.
“It is horrendous and it is deeply immoral to make people pay at huge interest rates for loans.”
Mally said in most European countries, interest charged for personal loans were very low.
“If you want to take up a loan for personal purposes from a bank, let’s say like in Germany, which is my country, you will pay five per cent or eight per cent per year,” he said.
“You take out K100, one year later you pay back K105 – that is how banking lending should be.
“Okay, each country has different conditions, but if someone takes K100 out and next week, or two weeks later he has to pay K200 or K150, this is ridiculous.
“It should never actually be allowed to happen.”
Pacific Financial Inclusion Programme (PFIP) manager Bram Peters said PFIP was definitely concerned.
PFIP is a Pacific-wide programme that has helped over two million Pacific islanders gain access to financial services and financial education.
It achieves these results by funding innovation with financial services and delivery channels, supports policy and regulatory initiatives, and empowerment of consumers.
“High interest rates, I would say improper lending practices, that lending rates are at 50 per cent on a monthly basis,” Peters said.
“If you annualise that and if you compound that, it goes to the thousands.
“We work with various partners and also try to help customers to be aware.”
Peters said it came back to financial education.
“We work with partners to make sure that there are formal financial services available in the communities, rather than have potential customers who would have to travel long distances and at very high cost,” he said.