Humanist

Media reports of the attempts by businessman Hamis Kiggundu to recover 120 billion shillings from Diamond Trust Bank (DTB) of Uganda and of Kenya interest me. It is reported that Kiggundu insists that DTB Uganda illegally deducted 85 billion shillings from his account; and similarly DTB Kenya illegally deducted 34 billion shillings from his account.

At first, I thought it was the case of electronic fraud where employees or owners of DTB in Uganda and Kenya had clandestinely fleeced funds from Kiggundu’s accounts held with their banks. It would appear, however, that Kiggundu, DTB Uganda and DTB Kenya had a loan deal, which has since gone south.

Media reports reveal that from 2011 to 2016, Kiggundu borrowed loans totaling 41 billions shillings from DTB. I am not clear what the loan terms were, but judging from the practice in Uganda where banks lend with high, double digit, interest rates, it is feasible to understand how come he borrowed 41 billion shillings and the banks recovered from him 120 billion shillings.

Be that as it may, what interests me the most is the justification that Kiggundu gives for his move to recover back his money. He acknowledges borrowing the money, but insists that he did not know that he had borrowed from a bank, DTB Kenya, not licensed to operate in Uganda. His logic seems to be that because DTB Kenya is not licensed to operate in Uganda, he should not have to pay back what he borrowed and or agreed to pay back.

I find it difficult to believe that at the time of borrowing, Kiggundu did not know DTB Kenya was not licensed to operate in Uganda. I suspect he did know and that the deal was too good not to look the other way and take the money. Me thinks this is exactly what is happening with borrowers of Parish Development Model (PDM) Funds.

If they are fully aware of the whole picture of the cost of borrowing PDM funds, then they have chosen to look the other way. Or, is it perhaps that they know the full picture and have already prepared to defend their decision not to pay back the loan and the cost of borrowing PDM funds.

“Minister Kasolo said his ministry has received complaints that some of the SACCO managers charge their members as high as 25 percent on loans, adding that such high interest impedes access to cheap loans in the country.”

Minister of State for Micro Finance, Haruna Kasolo Kyeyune quoted by the Cooperator

Time will tell. But, in the meantime, if a rich businessman, who can afford highly schooled lawyers to defend him, failed to pay back the loan he took and its costs, how about the rural poor without significant business acumen and capital for whom PDM loans are targeted? Do the targeted PDM borrowers fully appreciate the possibility that failure to pay back on time may result in compound interests that may triple the amount that they have to pay back?

It would appear that the loan Kiggundu took has become more of a liability to him than an engine of his business growth and development. Which, reportedly, is the norm in Uganda, especially in rural areas, where the cost of borrowing is crippling.

I thought so nearly 20 years ago and I still do, loans can’t bail out our rural poor.