CAMA appeals to consumers to immediately withdraw their money from banks and keep it safe in homes

* “Consumers will only wake up one day and only to find that their money in the bank has been wiped-out”

* BAM’s press release is a friendly warning to all consumers that their money is unsafe with the banks

* The reintroduction of new transaction charges in the name of VAT is unacceptable and unjustifiable

By Duncan Mlanjira

Consumer Association of Malawi (CAMA) has joined the outcry on the introduction of value added tax (VAT) which banks are expected to effect on some banking services from Monday, November 1 and appeals to consumers to immediately consider withdrawing their money from the banks and keep it safe in their homes, saying “this is a serious warning”.

In a statement issued on Saturday, CAMA executive director John Kapito said: “With the current situation, it is dangerous for anybody to assume that there will be safety of your money at the Bank with the new thief that has now become part of the Bank.

“Consumers will only wake up one day and only to find that their money in the bank has been wiped-out.

“We are also appealing to the Government, through the Reserve Bank of Malawi, to clarify about these high bank charges and transaction costs that the Banks are going to start implementing.”

Kapito contends that the introduction of VAT on most of banks’ services “will have a huge negative cost on consumers’ deposits as they will be required to pay various high transaction charges and other bank charges”.

“We are aware that most of the Banks recently increased their transaction charges and bank service charges and we assumed the VAT transaction charges were part of those increased bank charges.

“Therefore, the reintroduction of new transaction charges in the name of VAT is unacceptable and unjustifiable.

“Consumers have complained consistently over time regarding the high bank charges and a number transaction costs and this has had an effect on financial inclusion as most of the consumers started to close their bank accounts.”

Kapito further says currently the number of Malawian consumers with bank accounts “are still low because of these unnecessary bank charges”.

“These high bank charges and transaction costs have affected the Financial Literacy Program which was centered on educating consumers on benefits of saving money with the banks.

“Consumers were continuously informed on how unsafe it was to keep money within their homes and that saving money with the bank has long term benefits.

“It is now surprising that the very same thief that consumers were taught to run away from and warned against is now operating within the banks and where consumers deposits and savings will be stolen through high bank charges and transaction costs in the name of VAT.”

Kapito contends that the development is a threat to financial inclusion program.

He also sort of applauded Bankers Association of Malawi for informing the public of the effect of the VAT, saying this “is a friendly warning to all consumers that their money is unsafe with the Banks as it will be subjected to a number of deductions in the form of bank charges and taxes”.

Our appeal to consumers is to immediately make a decision between your deposits being stolen by the banks or keeping it safe somewhere else otherwise one day you will wake up and discover that your money has been stolen by the banks.”

Meanwhile, acting on behalf of “financially vulnerable members” of the Malawi public, Human Rights Defenders Coalition (HRDC) has engaged legal firm, Kawelo Lawyers to demand the Attorney General to suspend enforcement of some sections of the VAT (Amendment) Act.

In a legal notice, Kawelo Lawyers says if the demands are not met and the law comes into force, the clients’ instructions are to proceed with Constitutional review of the “impudged amendments”.

Kawelo Lawyers says HRDC was approached by the financially vulnerable members who include women doing small businesses; the elderly who receive remittances from their children and grand children working outside of the country.

It also includes people living with disabilities, peasant farmers and other members of the community ejusdem generis.

“Our clients instruct us that parts of the amendments to the Value Added Tax Act will affect the actualization of their rights to economic activity, equality and dignity,” says the legal petition.

“The amendments will grossly affect matters of financial inclusion — especially bearing in mind the financial dynamics in the times of CoVID-19.”

The instructions Kawelo Lawyers are to particularly highlight to the office of the Attorney General are that the amended law has added VAT on interchange fees between banks — which are mostly done through ATMs.

“There are places in the country with only single service providers and inter-banking has helped the rural masses with banking services. This helps with inclusion of poor masses in the financial industry,” contends the petition.

A second highlight is that the amended law seeks to add VAT on interchange fees between a bank and other financial institutions including mobile banking.

“As you may be aware these transactions have greatly helped with financial inclusion of the vulnerable groups of our communities especially in times of CoVID-19. Mobile banking is mostly used by members of the community with no bank accounts.”

“Our clients’ opinion is that all the above amendments to the law will greatly and adversely impact their rights to equality, to economic activity and dignity.

“The amendments have the potential to further widen the gap between the rich and financially marginalised members of our community. In the process, their rights to an inclusive formal financial sector will be greatly impeded by the proposed amendment to the law.”

Kawelo Lawyers says the instructions received from its client is to demand that the “amendments should not be enforced” and that the Attorney General “should start facilitating the process of reviewing the impudged sections of the amended law”.