We are going to show how statistics can be manipulated and made to lie! We will use just one bank here, of the different International Banks that exploit a captive market in Belize.
All figures are in Belize dollars. But when you are talking interest rates and bank fees, percentage wise it makes no difference which country you are in, or which currency you use.
One International Bank in Belize has a loan interest rate of 10.5% Sounds high, but reasonable. Banks of course, want collaterol for a loan. Usually, a physical asset, preferably real estate. After they get an appraised value on the current market, the normal process is to discount 50% of the value and loan you up to 50% of that same value. It may be much less. Banks will accept your various accounts, both business and private as security, or that of a co-signor guarantor. The money for guarantee, is usually noted on the accounts and the owner cannot spend it anyway. This is security, or you lend the money to yourself. Or your friend, or relative who is co-signing will effectively be lending it to you. The banks will be the ones to process and collect and do the accounting.
But here is a switch on a bank loan under $41,000. Let us say, you borrow a three year loan of $17,000 for some purpose. The interest rate for public consumption is 10.5%. What they don't advertise is the fact that you also have to pay for a life insurance policy on both you and your co-signer of $1000. Then we add on a "Savings Certificate" of about 10% or $1700, or $1,800 dollars. Usually it is around 11% of the amount of the loan, that you have to have in a "Savings Certificate". You do have to pay interest on some of this stuff. There is of course processing fees. A loan commission to be paid of $290. Some kind of "Service Charge" of $500.
Now, let's add all these things together, multiply by the 10.5% interest rate, and then multiply the figure by three, for the three years of the loan. What you end up paying is about $6000 on your three year loan for $17,000. Since we are only approximating here, the effective interest rate annually on that $17,000 loan is 35%. Not the 10.5% advertised. Mind you, if you pay some of the costs of the loan up front, you will still end up paying interest on it, as a full term cost over three years.
Back in centuries past, usury was illegal. The Christian Church had a rule. You could not charge more than 10% on a loan and after three years, the loan had to be liquidated. If you hadn't paid it off, too bad for the lender.
One of the interesting things about the International Banks lending to Belizeans in this captive market of Belize. Is that banks do not by law have to give you copies of your note, even after you sign it. These notes by the way, also give a bank the right to seize funds, from any and all accounts, that you the borrower, or your co-signor may hold, in whatever business name. Even though the loan itself, might be just a personal loan.
For a loan over $41,000, the interest rate climbs exponentially. What the effective rate would be, is anybody's guess, the banks are not telling these closely guarded proprietary money-making secrets.
So, should you be gold mining, robbing Chinese stores, or go into banking?
The sad thing about all this. No government to date in Belize has made any legislation encouraging Belizeans to start private banks and then encouraged them into going into the International market. Yet, there is ample reason why this should be done. Belize even has the local trained talent to do so. The laws are geared to deposits by big players. Even though those big players when they get to Belize and start up, immediately open small player local branches, which are "COVERED" by the main branch deposits. There should be a change of the banking legislation. An insurance fund for banks. All banks should be separate legal entities, each with it's own deposit guarantees. Then you could see some Belizean local banks start up. Heck, if a bank is serving a village with a monthly turnover of $35,000 Bz, All they would need would be a bank insurance default system, of $50,000, of which their premium would cost them as insurance, maybe $500. the cost of an employee, an extra add on to the business. This would secure the client. Time we got some competition in the banking business in Belize and build up our own industry.
In the meantime, bankrupt Ecuador has changed to the USA dollar. It is now the law and the Sucre is now out. One way of forcing governments to work their government foreign loans and government expenditures to the real market forces.
Since, much of the local banking information in Belize is secret, or obscured by creative British/Caribbean accounting practices, these figures are only approximate and may not reflect the true process, interest rates, values or other actual figures in the real world. Which may, be larger, or smaller in different cases.