‘Extension of loan period fake service to citizens after rate hike’

AMMAN — The Central Bank of Jordan (CBJ) on Monday raised the interest rates on all monetary policy instruments by 25 basis points, after an earlier policy change allowing banks to extend customers’ maximum retail loan maturities to 10 years instead of eight. 

While the CBJ said that the new loan extension regulations are “a protective measure for borrowers”, economists charged that it is “an advantage for the banks”, which will eventually receive a higher overall repayment.

Columnist and economist Khaled Zubaidi described the extension as “a fake service to citizens”, saying that it will increase the years in which citizens are in debt, with increasing interest rates, which eventually harms the economy as a whole.

“The decision seems [like] an attempt to embellish the bank’s image after raising the interest rates for the sixth time... In spite of the decreasing growth indicators, increasing unemployment and poverty rates and the unprecedented social and economic crises the country is witnessing,” Zubaidi continued in a public post, published on his social media account.

Abdulhadi Jolany, a financial auditor, echoed similar remarks.

“The extension of loans in light of the increased interest rates will mean paying more [money],” Jolany told The Jordan Times, adding that banks will not suffer from the increased interest rates, but borrowers will.

In remarks to The Jordan Times, CBJ Deputy Governor Maher Sheikh Hasan said that “the extension regulations are not binding, but rather an optional choice that seeks to give borrowers flexibility in handling their instalments after the raise, and to be less affected on monthly basis”.

He said that an increase in overall repayment amounts is a “logical result” of extending a repayment period, as the bank is also affected and should be taken into consideration when the loans are rescheduled or extended.

“The central bank is regularly observing the margins of loans in banks, which showed a decrease over the past two years. This is a general indicator that no exploitation or unjust practices occur,” he told The Jordan Times, urging citizens to read the new extension regulations published on the CBJ’s website to better understand the process. 

In a CBJ statement, the bank said that it raised the interest rate as a response to recent developments of interest rates in regional and international markets, and to maintain the competitiveness of the financial instruments denominated in the Jordanian dinar, as well as to protect the financial and monetary stability of the Kingdom.