Be wary of money lenders

More, desperate for extra enhanced incomes, have invested in fake investment schemes and ended up losing out when the institutions collapse.

 

The disturbing thing is that most micro-finance organisations are operating illegally and they target civil servants who seem to be gullible in terms of borrowing. Most money lenders target civil servants by offering “low” interest rates only to increase them to unsustainably high levels after having succeeded in luring many clients.

Masvingo provincial education director (PED) Ms Clara Dube called on teachers, who constitute the bigger fraction of civil servants and who normally borrow from money lending schemes, to desist from being servants of borrowing.

She said it was disheartening to note that teachers were the most vulnerable civil servants when it comes to borrowing and advised them to learn to live within their means.

“If we take a closer look we can figure out that teachers are the most gullible civil servants as they can be easily lured into borrowing. This is a reality and it is not good news to the profession as it puts us in bad light. I urge all teachers in my province to stop living on borrowing. They should learn to live within their means because once someone starts borrowing, it is hard to stop,” said Ms Dube.

She said most money lenders were not sensitive to the plight of civil servants whose salaries do not meet all their needs.

“We are aware that all civil servants in the country are not getting enough money to meet all their needs but depending on money lending schemes to cushion their plight is not an option either. Most of these schemes do not appreciate the situation teachers are in as they charge high interest rates which would leave you with nothing.

“Some interest rates are so high that after repayment one will be left with no money to feed his or her family. The moment you repay the debt you are left with no money and that scenario will definitely force you to borrow again and thus making it difficult to come out from the debt web,” said Ms Dube.

She said that money lending institutions were targeting civil servants because of their history in buying property on credit.

“Historically civil servants are known as people who depend on borrowing and they have become susceptible to micro-finance and money lending organisations, some of which are fraudulent. Unless they learn how to be content with their incomes, civil servants will continue suffering at the hands of these loan sharks.”

A senior policewoman, Assistant Inspector Ntandoyenkosi Mlilo, recently allegedly fleeced investors of over $50 000 in a botched up investment scam before she disappeared.

Police have appealed to members of the public who fell victim to her to report at Masvingo Provincial Police’s Criminal Investigation Department headquarters.

Provincial police spokesperson, Inspector Tinaye Matake, confirmed that Insp Mlilo was on the run and police were inviting all the affected members to make formal reports.

“I can confirm that one of our officers, Assistant Inspector Mlilo, who is stationed here and a teacher at Zimuto Police Primary School, are on the run after allegedly duping a number of investors of huge sums of money thought to be running into more than $50 000. We have since launched a manhunt but we are appealing to those affected to come and make formal reports at CID here,” said Insp Matake.

Insp Matake has also appealed to members of the public to be wary of “fly-by-night” money lending schemes.

“As much as people would want to make savings to buy assets, I urge them to choose better means of doing this. They should be very careful with their investments and put their money where they are sure that they would not lose it. Besides, many of the money lending schemes are operating illegally since they are not registered,” he said.

At the height of economic depression between 2007 and 2008, many individuals established micro-finance and money lending institutions some of which were milking people of their hard earned incomes.

Addressing micro-finance institutions in Masvingo recently Zimbabwe Association of Micro-Finance Institutions (ZAMFI) director Mr Godfrey Chitambo discouraged civil servants from over-borrowing. He said his organisation was pushing for a credit bureau which would regulate the lending trends of all micro-finance institutions.

“In our assessments, we have discovered that some people, especially civil servants would have accounts at all the micro-finance houses and by so doing one will be left with no money at all. This kind of borrowing is disastrous and it should be stopped forthwith. We are pushing for a credit bureau which would reflect the creditworthiness of a client before the money lending institutions decide to give that person money.

“In other countries they have since introduced this as a way of saving people from a burden of over-borrowing. Where it is used you cannot borrow from two money lending institutions because they would see it at the bureau. The bureau would have a data-base of all micro-finance and money lending institutions as well as clients that your name should not appear twice but only once,” said Mr Chitambo.

He said while micro-finance institutions were in business, they were mandated to provide financial counselling to the borrowers on the dangers of borrowing.

Mr Chitambo said borrowing should serve as a cushioning strategy and not the other way round where a person would become poorer after borrowing.

“Micro-finance houses are there to improve people’s lives and not to impoverish them. When you see yourself being entrenched into borrowing and yet you continue wallowing in poverty then you should stop. Some people require redemption from the syndrome of borrowing. In actual fact they can’t live without accumulating debts and that is not normal,” he said.

Ms Shanangurai Chinamatira, a civil servant, said she borrowed from money lending institutions because she had many responsibilities which could not be catered for by her salary.

However, she said a number of money lending institutions were not run professionally as they changed terms of payment even after having signed a contract.

“My salary is not enough to cater for all my financial needs, that I am forced to borrow from money lending institutions just to augment my income. However, I am taken aback by some institutions that offer ‘enticing’ interest rates at the beginning only to change when you pay your second installments. They are now milking us of our money and we call upon responsible authorities to do something,” said Ms Chinamatira.

Stories have been told of micro-finance and money lending organisations taking clients deposits, which is illegal.

In a recent statement Reserve Bank of Zimbabwe (RBZ) Governor Dr Gideon Gono said he had received complaints from many clients of micro-finance institutions and money lending schemes on their Illegal operations.

Dr Gono advised members of the public that taking deposits is a banking activity, which is a preserve of institutions registered as banks in terms of the Banking Act (Chapter 24:20).

Any person who conducts a banking activity without a banking licence contravenes Section 5 (3) of the Banking Act and shall, in terms of that section, be guilty and liable to a fine or imprisonment or both, said Dr Gono in a statement.

“We have received reports about the unethical, objectionable and unscrupulous business practices by some money lending and microfinance institutions. Some have usurious lending rates of as much as 50 percent per month. They also employ abusive debt collection including disposal of pledged collateral without following due legal processes,” said Dr Gono.

He said some micro-finance institutions were illegally taking people’s deposits and once they are caught doing that the law will take its cause.

“Some microfinance and money lending institutions are illegally taking deposits from members of the public ‘spicing’ their illegal activities by quoting ‘tempting’ deposit rates posing a threat to financial stability in the country. These institutions by law are not allowed to take deposits from their clients and those found doing so shall have their operations stopped forthwith,” he said.

The RBZ recently canceled the operating licence of McDowells International, a money-lending Institution.

“The RBZ determined that the institution was illegally mobilising deposits from unsuspecting members of the public to further the personal interests of shareholders. Further the RBZ has determined that members of the public are now failing to access these ‘deposits’ from the institution which are now in access of $4 million,” he said.

“It was determined that McDowells International was not adhering to ethical business practices. The institution’s unethical conduct included inadequate disclosure of business conditions to clients and usurious lending rates of as much as 50 percent per month which translates to an astronomic 600 percent per annum.”

This week, the central bank also cancelled the money-lending licence of All-Angles Investments. The firm was collecting “deposits” from unsuspecting people and the money had grown to US$1 million.

The problem of over-borrowing is, nevertheless, not a problem with civil servants alone, as more and more people outside the government payroll continue to seek money from micro-lenders. In many cases, the interest rates are high and requirements for collateral are too strict that if one fails to repay the loan by a few days the lender quickly moves to attach or cause the attachment of property.

Another challenge with borrowing is whereby one borrows for consumption, as opposed to investment. Such borrowing often results in the borrower failing to honour their debts.

Borrowing is such a significant matter that even the Bible has sections dealing with it. While the Holy Book does not forbid borrowing per se; a problem only arises when one fails or neglects to repay. You actually become wicked if you don’t honour debts!

A key quality of a righteous person that is found in Ezekiel 18:7 says he “returns what he took in pledge for a loan.” Romans 13:8 states “Let no debt remain outstanding” while Psalms 37:21 (New International Version) specifies that “the wicked borrow and do not repay.”

Proverbs 22:26-27 says, “Do not be a man who strikes hands in pledge or puts up security for debts; if you lack the means to pay, your very bed will be snatched from under you.”