Bankers blame handling costs for differing dollar exchange rates
Aug 24, 2015
All dollar bills are legal tender but in Uganda, bills below $50 fetch less at the money changers. Bankers now say that dollar bills of $1, $5, $10 and $20 are exchanged for less than the market rates because they accumulate quickly and incur high storage, and handling costs.
By Samuel Sanya
All dollar bills are legal tender but in Uganda, bills below $50 fetch less at the money changers. Bankers now say that dollar bills of $1, $5, $10 and $20 are exchanged for less than the market rates because they accumulate quickly and incur high storage, and handling costs.
Handling fees cover the cost for the packaging, repackaging and movement of goods and are normally charged on the customer and not the seller.
Though the dollar was trading at sh3,631/41 buying and selling on average on Monday, banks and forex bureaus around the country were trading dollar bills below $50 at a much lower rate of sh2,600.
This implies that for every dollar bill under $50, the banks and forex bureaus make a margin of sh1,000 on average.
“Bank of Uganda does not set the prices for small dollar bills. Banks feel that small bills become many and it becomes costly to handle them. The costs of operation then affect the pricing,” Fabian Kasi, the Uganda Bankers Association and Centenary Bank boss said.
He made the comments at panel discussion during a Financial Consumer Protection orientation meeting at Silver Springs Hotel. The meeting was attended by traders, manufacturers, teachers, the civil society, media and members of the public.
The meeting was held to raise awareness of consumer rights in the financial sector as well as the responsibility of players in the sector to be fair, reliable and transparent.
There were complaints over banks issuing bigger loan amounts than requested, the lack of choice for loan insurance, and exorbitant penalties for rescheduling loans.
Kelvin Kiyingi, the chairman financial consumer protection consultative group urged users of banking services to utilize the Central Bank Financial Consumer Protection guidelines displayed in every bank as this will guard them from being taken advantage of.
“Before you take a bank loan, scrutinize the documents critically and negotiate terms before you sign. Once you are a guarantor for loan, you are also a borrower to an extent and should be aware of your responsibilities,” Kiyingi said.
“People that are financially illiterate are a danger to themselves, their families and to the entire country,” he added.
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