BOU, Bankers Association Defend Charges on School Fees

Dr Adam Mugume, the Executive Director for Research Bank of Uganda says that banks incur expenditures to offer services and there is a justification for users of these bank services to contribute to the running costs.
26 Feb 2021 16:29
Bankers have advised parents paying school fees, to use alternatives if they do not want to pay bank charges.

Most commercial banks are also charging at rates far beyond what they submitted to the Bank of Uganda, which it publishes regularly.

This comes as more parents prepare to send back their children to school starting next month, amidst reduced incomes due to the effects of the covid- 19 pandemic.

Most parents are worried about how they will raise the required money to pay for the educational requirements of their children and incomes dwindled.

Some surveys show that many children have already dropped out of school, with some in candidate classes failing to return when they were recalled in October last year.  Most parents either lost their jobs or had their incomes reduced when they or the reality of the pandemic hit.

A good number has also remained in the situation to-date, and the thought of schools re-opening causes nightmares, and are calling for government intervention to see that schools reduce the fees.

Schools have generally turned down requests to reduce the fees, arguing that the cost of living has generally gone up and that they too need more money to sustain the operations.

On the contrary, some are demanding arrears from the period that the children were sent home after a government directive in March last year.

The government, which is appealing to the schools to be considerate to parents, says it cannot compel the owners to reduce the fees or other costs.

Banks have also been accused of contributing to the costs to the parents by charging them whenever they or their children are banking the fees.  The bank charges on depositing of school have for long been challenged by parents, who question what the money is for and who benefits from it.

The argument is that the parent is depositing money into a school account, not their account and that if any charge were to be made, it should be met by the school, whose money it is.

“I am not the one who chose to pay fees through this bank. It is the school that chose it and forced it on me. Why should I be made to pay for it?” says an angry parent at Centenary Bank main branch.

Some say they have quarrelled with the banks, but they do not get any response. Others decide to bank the exact fees as asked for by the schools, but some schools treat them as unpaid school fees because the banks deduct them.  The parent is then forced to pay it later.

In 2011, Sam Anguyo, a proprietor of a school in Arua unsuccessfully sued commercial banks which were making the charges on fees asking the court to compel the banks to bear the cost, since the people paying the fees are not customers to the said banks.

The banks, which included Centenary Bank and eight others, argued that they are doing legal business which is well-known to the regulator, the Bank of Uganda.  Anguyo failed to secure an injunction from Justice Geoffrey Kiryabwire. 

Dr Adam Mugume, the Executive Director for Research Bank of Uganda says that banks incur expenditures to offer services and there is a justification for users of these bank services to contribute to the running costs.

BOU regularly publishes the various bank charges for each commercial bank, including charges levied on school fees. It urges the public to choose banks according to convenience, including charges.

Of all the 23 commercial banks regulated by BOU, only one, Bank of India, makes no charges on school fees deposits.

According to the BOU bank charges sheet, Equity Bank and Absa make the highest charges at 2,600 Shillings while ABC Capital, Cairo, Stanbic, Standard Chartered, Tropical, NCBA and Bank of Africa charge 2,500 Shillings.

The sheet shows that Bank of Baroda charges 2,300 Shillings while the rest of the banks ask for 2,000. BOU says it is illegal for any bank to make charges above the stated ones.

“Bank customers who are being offered/charged differently from what is published, are advised to report to Bank of Uganda”, says a statement on the sheet.

Stanbic Bank Head of Corporate Affairs, Cathy Adengo says if the parents pay by mobile money using the shortcodes provided, they can avoid the charges, because the system is free.

“The system is aimed at not only saving time for the depositors and reducing congestion in the banking halls but to reduce the cost to the payers,” she says.   

A Kampala lawyer, Ali Barekye Turyahikayo says it is wrong for two parties to a contract, to pass on the cost of their transactions to a third party.

"As per the contract Act, you would not be charged. The contract is between the school and the bank. Even if the bank is acting as an agent, the agent is paid by the principal, in other words, the one who appointed the agent. However, under the duties of a bank and a customer, you may be charged as per the terms and conditions set forth by the bank," he says.

The Uganda Bankers Association Head of Communications and Corporate Affairs, Patricia Amito Lutwama, says the banks are serving the parents and the parents should pay for it.

“You are paying for a service, the way you pay a fee to send money to a mobile money account, pay you water bill, Umeme etc through mobile money. If you are not willing to use the service through the banking hall, then there are alternatives like school pay that some banks have created,” says Lutwama.