The First National Bank Botswana (FNBB) this week came under heavy criticism for allegedly charging government sponsored university students’ services fee for their bank accounts.
The revelations came to light in Parliament after Special Elected Member of Parliament (SEMP) Bogolo Kenewendo posed question to the Ministry of Tertiary Education, Research, Science and Technology on Monday.
Amongst other things, Kenewendo wanted to know if the ministry is aware that students are charged service fees by their bank ÔÇô FNBB.
The Students Allowance Disbursement Account contract is considered one of the most lucrative contracts in the local banking industry as it brings in new clients in the form of sponsored students every year, and the amounts involved are huge, translating into many added benefits for the bank that holds the contract.
On Monday the Ministry of Tertiary Education, Research, Science and Technology made startling revelations that the multibillion pula students’ allowances disbursement account has not been reconciled until recently.
Following the revelations, Kenewendo fired back salvos of questions, amongst them asking the minister whether the ministry will institute a forensic audit on the account.
In response, Minister Alfred Madigele said that that the lucrative contract was awarded to First National Bank Botswana (FNBB) in 2006 after the bank was the only one that expressed interest for the tender.
FNBB then retained the contract for 9 years until the contract was put again for re-tendering in 2015. However this time around all major banks expressed interest in the contract but FNBB came out on top. The bank’s winning value proposition largely hinged on accessibility as it had a larger footprint of branches and ATMs.
“The cost associated with the contract is the P99, 000 paid to FNBB for the management of the students allowances disbursement account,” the minister said. “And the benefits enjoyed by students are registration and opening of accounts, debit card and easy access to their funds through various distribution channels.”
The minister explained that FNBB has been preferred during tendering process because the bank was the least costly and met all the tender specifications. The length for the current contract is for three years, and is due for renewal in December 2018.
At the same time, while responding to Kenewendo’s queries, Madigele said the government has only started doing reconciliations recently.
“We have only recently put a team together tasked with the reconciliation of the said account. So far we have only done reconciliation for the financial year 2016/2017 and we will be working backwards to reconcile previous years,” said the minister.
The minister replied that for now they are mainly concerned with finishing the reconciliation and if there are any discrepancies then they will take the appropriate steps to get to the bottom of it. On the issue of service fees charged to students, the minister said the bank does not charge service fees.
However, Kenewendo told the minister that students are actually charged service fees, which include monthly account fee and transactional fees. Upon that insight, the minister said he will look into the issue and see if indeed students are charged services fees.
By late Monday, some students who spoke to The Telegraph perused their bank statements which show that the bank actually charges service fees to students.
Last year it was revealed that over the past three years, the government sponsored 138,969 students to study locally, with 48,264 of them placed during 2013/14; 48,000 during 2014/15; and the remainder during 2015/16. The budget was P1.8 billion, P1.7 billion and P2.3 billion respectively.
FNBB has seen its non-interest income rise substantially over the years on the back of improved distribution channels such as mobile banking which is a firm favourite for students. The bank also benefits from the countless transactions from its large clientele base.