Banks deny claims of difficulty to access loan

The association of banks in The Gambia has denied claims that banks in the country are not giving out loans, making it difficult to finance projects that would create employment and the attendant economic developments.

Mr Mamoud Jagne

“It is not entirely accurate that banks are not giving out loans,” Mamour Jagne, executive secretary of Gambia Bankers Association, said in an exclusive interview with this paper. 

The interview was prompted by comments of some economic operators and private individuals that ‘it is very difficult or impossible to access finance” from any of the 13 banks in the country. 

“It is not true that there is a blanket ban on loan lending,” Mr Jagne emphasised though he noted that the banks are lending to customers on a very selective basis. 

Mr Jagne, himself an erudite banker, stated:  “The purpose of a bank is to mobilize excess fund from those who have it and lend it out to those who don’t have it.  It is in this process that banks make profit that they pay interest to the depositors and dividend to the shareholders.  It is therefore in the interest of the banks to lend out to the customers.” 

According to him, if banks are not lending out to the customers, then they most have a very good reason for doing so.  He said the low level of loan lending is on account of a number of reasons. 

One, he said, banks don’t lend out just because they make money in the process.  “Banks lend out because you have a good project that they know you will be able to execute successfully and that you are a reliable and trustworthy person.   

He says the banks also consider the fact that whether when a customer is given a loan, he or she will able to use it for the intended purpose.  This is because there are many instances where customers will present a very good business plan to the bank when seeking loan but the moment the bank approved it and the customer is given a loan they use the funds for something else totally different from the business.  “So this is why the integrity of the customer and his ability to use the funds properly and pay back the bank the capital with the interest are the most important thing when deciding whether to give out the loan or not,” Mr Jagne remarked.

He said the banks also look at your banking history - whether you have a good banking history and you have never defaulted before. 

They also look at your relationship with other banks., said the founder managing director of Arab Gambian Islamic Bank (AGIB), adding that the rationale behind this is because there are many banks in the country and some customers have accounts with more than one bank and often times some of them will take loan from one bank and transfer to another bank to take loan without settling the first one.  Now, that aspect has been taken care of with the establishment of the Credit Reference Bureau where banks can check the credit worthiness of any individual who is seeking loan.

Mr Jagne also said all the above-mentioned factors are taken into account by the banks before any individual would pass the test to qualify for a loan. 

However, he pointed out that there is another dimension that influences the banks’ willingness to give loans, that is the non-performing loans portfolio. 

Commercial banks in The Gambia are grappling with bad debts more than ever as their loans and advances portfolio continue to swell while increasing sums of monies given out as loans to customers continue to remain as bad debts, which are debts not likely to be paid, giving rise to banks losing millions of dalasis in profits.

Mr Jagne noted that there are many bad debts in the economy and “we don’t want to increase and if anything, we want it to go down because that will strengthen the financial sector”.  Nobody wants to lend and tomorrow you have to follow the customer to pay it|”. 

“I can tell you that following a bad debt is very expensive a thing.  You have to go and meet the customer many times - you have to drive your car, you have to make telephone calls, and if you want to go to the court there is cost associated with that,” he said. 

Therefore, banks are not eager to lend to anybody who is likely to default but if anybody meets the test, certainly, the banks will give you loan, said the bankers association executive secretary said.