Lekhetho Ntsukunyane and Mamello Mokaeane
THE Central Bank of Lesotho (CBL) has embarked on nationwide investigations aimed at weeding out illegal financial institutions and money lenders, the MNN Centre for Investigative Journalism (MNNCIJ) has learned.
This follows reports of how clients were being treated by rogue money lenders who, among others, solicit and seize important and personal documents like passports, national identity cards and debit (ATM) cards from the borrowers, as collateral for loans.
The MNNCIJ observed that the lenders even force borrowers to furnish them with details of their private identification numbers (PINs) which serve as personal secret codes to access their bank accounts.
The illegal money lenders then use the borrowers’ PINs to actually withdraw loan instalments from clients’ bank accounts on paydays. The borrowers are only given back their debit cards after the money lenders have made the monthly instalment withdrawals.
The practice continues until the loans plus exorbitant interest charges have been paid back in full.
According to the CBL, money lenders should charge an interest rate of 25 percent per year on loans. However, most money lenders charge anything from 25 to 30 percent per month from loans, bloating interests against the country’s financial laws.
Most of the victims of the money lenders are either teachers, law enforcement officers, members of other security agencies and pensioners.
The malpractice could however, end soon with the help of the recently launched nationwide investigations by the CBL.
The bank’s delegation, comprising Director of Corporate Affairs Napo Rantsane, Head of Non-Banks Supervision Division Bafokeng Noosi, Chief of Corporate Communications Ephraim Moremoholo and Technical Communications Specialist Moroke Moroke, told this organisation in a recent exclusive interview that the investigations were aimed at identifying all the illegal money lenders and shutting them down.
Mr Rantsane said it had come to the CBL’s attention that there were mushrooming unlicensed money lenders whose practices violated the rights of their clients.
“These practices include, but are not limited to; forcing clients to surrender important documents like passports, IDs and debit cards with PIN codes; charging exorbitant interest rates, contributing immensely to the high levels of over-indebtedness and engaging in collection methods that are abusive and intimidating to their clients,” Mr Rantsane said.
It was against the backdrop that the bank commissioned nationwide investigations to clamp down illegal money lenders.
“The CBL, as the commissioner of financial institutions in the country, is investigating unlawful money lending business and thereafter legal action will be taken against anyone found to be engaging in unlawful money lending business.
“The bank is currently taking stock of all money lenders who are operating illegally in the country. Once the investigations have been completed, appropriate action will be taken to shut down all unlicensed and noncompliant financial institutions and money lenders in Lesotho and this will be done in collaboration with relevant institutions of government,” Mr Rantsane said. The investigations were currently underway in all the country’s ten districts, he added.
Asked what role the bank played to monitor operations of financial institutions in the country, Mr Noosi said: “The CBL is required by law to publish a list of licensed financial institutions and money lenders and does so by regularly publishing them on the website and various newspapers within the country.
“The bank also continually advises the public and the media on the updated list of licensed financial institutions as and when the need arises. It is wrong for money lenders to confiscate documents like passports, IDs and debit cards with pins. It is equally wrong for the people to surrender these documents to money lenders when they apply for loans.”
Passports and IDs, Noosi added, remained the property of the government “and shall be produced when so required by an authorised official or relevant authority. This means the sole purpose of a passport is to facilitate travel while IDs are meant to verify the real identity and not to be used as collateral for loans.”
He added ATM or debit cards were meant to facilitate safe and secure transacting “and may be used by the authorised person only. The PIN is a secret code and should only be known by the owner of the bank account. Under no circumstances should it be given to a money lender.”
Mr Moroke emphasised that the CBL does not support “and will never allow these illegal practices that negatively affect the integrity of the financial sector in Lesotho”.
“The bank is also aware and concerned that some money lenders, particularly those who are not licensed by the Central Bank are engaged in bad business practices or market conduct.”
For his part, Mr Moremoholo urged the public to desist from dealing with illegal money lenders.
“The bank will also continue to educate the public on their rights and responsibilities as consumers of financial products and services,” he said.
Meanwhile, the Mafeteng police are investigating an incident where 128 national ID cards and 15 debit cards that were found dumped in a toilet within the department of public works and transport in the town.
The police said the documents were discovered shortly after one of the money lending businesses, MM Financial Loans, reported them as missing from their office in a suspected burglary last month.
The district police commander, Senior Superintendent Tsea Makara, said they were shocked to learn that MM Financial Loans kept the clients’ documents as collateral for loans.
“What is even more shocking to us is that we learned clients were also obliged to provide their ATM cards’ PIN numbers upon applying for the loans,” S/Supt Makara said.
He added, as the police, they were ready to partner with the CBL “to root out such practices because they are against the financial laws of the country”.
MM Financial Loans is one of the several money lenders which do not appear on the list of financial service providers licensed by the CBL as at 31 March 2018, by the bank.
Repeated efforts to engage the MM Financial Loans owner, Nthole Mojapela, proved unsuccessful as he kept postponing conversation with these reporters.