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Commercial banks in Mozambique cannot charge customers with loans more than the a third of their monthly net income, regardless of current interest rates.
“The client may approach his/her bank and agree to the restructuring of the loan, so as to allow the payment of the instalments in arrears in view of their real financial capacity,” the Bank of Mozambique explained to @ Verdade, while simultaneously recognising that its ability to enforce the law was limited. In fact, a Bank of Mozambique administrator admitted, “we do not have an instrument capable of forcing microfinance to renegotiate with its clients”.
The economic and financial crisis afflicting Mozambicans since the discovery of the illegal Proindicus and MAM debts in 2016 has galvanised credit interest rates as a result of central bank monetary policy decisions. Many Mozambicans who had contracted loans or other bank credit products at well below 20 percent interest saw their monthly instalments rise to 40 percent, even surpassing 60 percent at some microfinance institutions.
Most bank customers, who live off their honest salaries, have seen the cost of borrowing rise precipitately to levels above 50 percent of their income. Data from the Bank of Mozambique indicate that the Non-performing Credit Ratio that was below 6 percent in December 2016 soared to a peak of 13.8 percent in the last quarter of 2017.
Among the many affected and who lost their assets to the banks are Abdul Hamid Mamudo Issufo and Leopoldina de Fátima Martins Issufo, who have appealed to the Commission of Petitions and Complaints of the Assembly of the Republic on “the dizzying raising of interest rates, without prior notice, by the bank”.
They contracted a housing loan with the FNB in 2014 at an interest rate of 17 percent, but the worsening economic and financial crisis and the Bank of Mozambique’s monetary policy measures raised repayments to 31 percent of the their combined incomes.
“For legal purposes of granting credit, the total credit responsibilities of a client cannot exceed one third of his income, because it exceeds their financial capacity and the client cannot fulfil the obligations, the Bank of Mozambique told @Verdade.
Bank of Mozambique unable to enforce law
On further questioning, the central bank added that: “By allowing the client’s credit responsibilities to exceed one-third of their income, the financial institution is in breach of the provisions of article 114, paragraph 4, of the Labour Law approved by Law No. 23/2007 of 1 August, which prohibits discounts in excess of one third of the monthly remuneration of the worker, in conjunction with Article 823 (1) (f) of the Civil Procedure Code, which provides for the protection from seizure of two-thirds of the salaries of civil servants”.
Asked by @Verdade what the procedure was for bank customers with credit repayments exceeding one third of their pay, the bank said that: “Under the duty of implementing corrective measures of problematic credit management to which banks are required under paragraph 126.96.36.199.3 b) of the Risk Management Guidelines, approved by Notice No. 4/GBM/2013 of September 18, the client may approach his bank and agree to the restructuring of the loan in order to allow the payment of the instalments in arrears in view of their real financial capacity and the legal limit of one third of their net income.”
The central bank explained to @Verdade that “in the absence of an agreement for restructuring, the client may file a complaint with the Bank of Mozambique or to other entities such as the Ombudsman”. The central bank also clarified that the agreement should be based on some assumptions such as the “willingness of the borrower to liquidate the credit, information of the actual financial capacity of the borrower, existing guarantees, permission for the Bank to monitor the borrower periodically, etc., and the parties must act in good faith, both converging to the common interest, which is that of mitigating non-compliance”.
But attempts by Abdul Hamid Mamudo Issufo and Leopoldina de Fatima Martins Issufo to renegotiate with the FNB were unsuccessful, and they even received verbal threats from bank officials.
In addition, their appeal to the central bank proved fruitless, given that attempts to renegotiate the loan with the FNB, particularly interest on late payments that compound normal interest in the event of default, were unsuccessful.
Paradoxically, the Bank of Mozambique told @Verdade that its intervention “is limited to verifying compliance with rules governing the activity”.
In addition, Bank of Mozambique administrator Felisberto Navalha acknowledged last May: “We do not have an instrument capable of forcing microfinance to renegotiate with its clients”. With interest rates above 60 percent, loans from microfinance banks have been exhausting the assets of their loan customers.
By Adérito CaldeiraSource: A Verdade