An avalanche of new ideas

Two weeks ago I wrote in glowing terms about the new “Islamic” banking services that had just been introduced by FNB. As you may know there are strict rules that Muslims are required to follow when they consider financial matters. The biggest of these rules states that interest should not be earned on a loan. This does not mean that a lender cannot make a profit on a loan but it is forbidden for this to be in the form of interest, it must be something else.

So FNB developed and launched Islamic lending mechanisms. Instead of variable “interest” on top of the amount of a loan a customer is now charged a fixed amount of profit to the bank on top of the loan amount.

The only real difference between this and a conventional loan is that the extra money, the profit, is stated up front and is fixed. Unlike a conventional loan the repayment doesn’t change if the basic interest rate changes.

So what happened? The Managing Director of another bank contacted me to talk about similar services that they deliver. I’m not going to name the bank in question because I have not yet had his consent to quote him but he described various fixed repayment lending mechanisms that they already have.

Firstly it was refreshing to get some feedback, something that happens very rarely! Secondly it was good to hear that there are lots of options available for banking customers.

Many of us are very enthusiastic critics of banks but I think that it is genuinely good news that competition between the banks is leading to greater choice for us all.

However I still do think that FNB deserve a lot of credit for gaining the competitive advantage by their excellent use of that great competitive weapon: publicity. Even if other banks do already deliver similar services FNB are always going to be able to describe themselves as the first bank that “introduced Islamic banking”. No matter what other banks jump into this market FNB will be, and will be remembered as being, pioneers and that is going to do them no harm at all in the long run.

So let’s give credit where it is due. We got a press release from Stanbic recently announcing their new TransactPlus account. In itself this is a fairly conventional account with the features that we are used to like a debit/ATM card but the key difference is that there is a monthly fee of only P10. Yes, ten. There is also, most importantly in my opinion, “no minimum income level”. It’s open to everyone. Now this IS a big issue. So many bank accounts are only available to those who earn more than a certain amount and this leads to the situation we have where so many of us can’t afford to have a bank account at all. OK, so it is easy to operate with cash but what happens when you want a home or car loan? They always ask for bank statements and I think this just contributes towards to some of the social divisions we see in our society. Some communities are prevented by circumstances from improving their situations through those old-fashioned activities like working hard and saving money.

In the same press release Stanbic talk about a new savings account called PureSave. The big thing with this account is that it’s absolutely free yet pays interest. That’s another thing that might help the less affluent end of the spectrum get into a savings habit.

I agree with Dichaba Molobe whose column in Mmegi is always full of common sense. Education is by far the best way to elevate the people of a country but we can help this happen more quickly if entities like the government and banks remove some of the obstacles to each of us making and saving our hard-earned money. This is particularly important amongst the poorer parts of our society.

Now clearly a major part of FNB and Stanbic introducing these new products is that they themselves want to make more money. Out of us. They are, quite literally “exploiting” us but there is absolutely nothing wrong with “exploitation” so long as it is balanced. Yes, my bank exploits me by taking my money and making profits but I exploit them by using the services they provide. Yes, a restaurant exploits me by charging me slightly more than the total cost of the food they prepare and the cost of the staff who serve it but I exploit them by eating their delicious food and letting my kids run around making lots of noise. Exploitation is only to be condemned when it is based on deception as it is with many loan sharks and holiday clubs.

Let me stress that this column is NOT here to advertise a particular bank, or indeed any company, but I do think innovative products should be recognised when they emerge. FNB and Stanbic have done that recently and even if they help just a few customers save more money for a rainy day, or get that home or new car then I think we should be happy customers.

Next week I promise I will do my best to be nasty about banks again. OK?

This week’s stars!

• Ofentse and Kayabe at G4 Security for being speedy and chasing away bad guys!
• Osenotse at Stanbic for great service with a smile.
• All the guys at Total Filling Station for speed and for a song.
• Keitumetse at Barclays Broadhurst for just sorting things out when a customer had a bag and cards stolen.
• Vera at FedEx for tracking down and personally delivering a lost parcel. And it was on New Years Eve!