Data released last week by the Bank of Ghana reveals that even as borrowing corporate customers of banks are enthused by falling lending rates – at least on short term loans of less than 18 months – they still have to contend with loan fees which add significantly to the total costs of loans being taken.
Banks charge their customers various loan fees, usually fixed rates, in addition to the interest applicable on a loan. These fees come in three categories – commitment fee; processing and establishment fee; and arrangement fee, all of which essentially are meant to cover the administrative, logistical, internal manpower, and third party professional service costs (such as legal fees) which banks supposedly incur in structuring, arranging, disbursing and monitoring a loan.
BoG’s latest survey reveals that as at the end of 2018 some banks were charging corporate borrowers, flat rate fees of over five percent on loans. Being flat rate fees, their impact on the actual cost of short term credit can be inordinately high – for instance fees adding up to five percent translates to an extra annualized cost of 20 percent on a 90 day loan, which at current interest rates could increase the total cost of the credit by well over one third.
To contain this effect, some banks have a range for the loan fees, with customers being expected to pay the lower end of that range on the shortest tenured loans and the upper end on the longest tenured loans. Some other banks though have set inflexible loan fees, applicable for all loan tenors but at relatively low rates. Conversely yet other banks say their loan fees are negotiable which means the rates they report to the central bank are merely indicative.
However, here are some of the reported loan fees:
Access Bank charges corporate customers between 0.25 percent and two percent (depending largely on loan tenor) as commitment fee, and the same range for processing fee and for arrangement fee respectively, bringing the total to between 0.75 percent and six percent of the loan value, flat rate.
Agricultural Development Bank charges two percent each for both commitment and processing fees and these are negotiable, but it does not charge arrangement fee meaning that its total loan fees are four percent of the loan, but this is negotiable.
Barclays Bank charges 0.25 percent as commitment fee and between 0.25 percent and 1.00 percent as arrangement fee but has not disclosed its processing fee. This adds up to between 0.5 percent and 1.25 percent and an undisclosed processing fee.
Bank of Africa charges 1.50 percent commitment fee, the same for processing fee and does not charge arrangement fee, bringing the total flat rate fees to 3.00 percent.
CAL Bank charges one percent processing fee, another one percent arrangement fee but no commitment fee, bringing the total to a flat rate of two percent.
Ecobank charges 0.75 percent as commitment fee, one percent as processing fee and between 0.25 and 0.60 percent as arrangement fee making for a grand total of between two and 2.35 percent.
First Atlantic Bank charges neither commitment fee nor arrangement fee but charges processing fee of 0.25 percent.
FBN Bank charges one percent commitment fee, 1.5 percent processing fee, but no arrangement fee, making for a total flat rate charge of 2.5 percent.
GCB Bank charges 0.75 percent commitment fee, one percent processing fee (subject to a minimum of GHc1,000) and arrangement fee of 0.5 percent making for a total of at least 2.25 percent.
GT Bank charges one and two percent commitment fee, between 0.25 and 0.75 percent processing fee and between one and two percent, making for a total flat rate of between 2.25 and 4.75 percent.
National Investment Bank charges 1.5 percent each for both commitment and processing fee – totaling three percent – but does not disclose its arrangement fee which would raise that total flat rate charge.
Prudential Bank charges 0.5 and one percent commitment fee, between 0.5 and two percent processing fee and 0.25 and 0.5 percent as arrangement fee.
Stanbic Bank charges 0.5 percent as processing fee and two percent as arrangement fee, totaling 2.5 percent. but does not disclose its commitment fee.
Zenith charges between 0.5 and two percent processing fee and between 0.5 and 1.5 percent arrangement fee but does not charge commitment fee.
By Toma Imirhe