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about six percent per month, moneylenders are charging up to 40 percent per month.
They also demand collateral in the form of cars, television sets, radios and even cellphones that they keep until the principal and interest are paid in full.
Although some of these moneylenders usually charge higher interest rates and are often demonised, their services are sought after because they are fast and flexible to customers.
The more discerning parents turn to banks such as POSB, which offer reasonable interest rates.
Saving for fees has proved difficult as the majority of workers in the country, mainly civil servants, earn salaries that are below the Poverty Datum Line pegged at US$520. Civil servants earn a minimum salary of US$180 per month but are also supposed to pay rentals, bills and school fees.
Many Government schools in rural and urban centres demand fees ranging from US$10 to about US$300. The fees are higher for boarding schools.
A survey by The Herald in Harare showed that the majority of people have to borrow to pay school fees, examination fees, rentals, funeral costs and unforeseen incidentals.
They are now caught in a debt trap.
Many parents and guardians are rushing to beat the Zimbabwe Schools Examination Council May 27 deadline and pay school fees today and tomorrow.
Others, however, use the loans to buy stands, cars and household goods. The priorities and needs differ depending on class.
The majority of people without personal accommodation in all urban centres in Zimbabwe have sad stories to tell and it is this class of people that visit moneylenders frequently.
Most of the people interviewed said they borrowed out of desperation.
Ms Maudy Mapiye, a receptionist at a Government department, said she had borrowed US$400 from the People’s Own Savings Bank to top up payment for a stand.
The money would be repaid at US$36 per month for one year including US$15 for the loan application form.
Another civil servant, who declined to be named, said she had borrowed US$250 to supplement her paltry US$180 salary per month.
“I had no choice but to borrow because I cannot manage with US$150 per month. I need bus fare, groceries, rent and many other things,” she said.s
“This is convenient as I have been advanced with a lump sum, which I repay with a little amount every month,” she said.
However, other informal institutions charge up to 60 percent and their monthly instalments can go up to US$200 dollars per month.
A manager with a local construction firm who earns over US$4 000 said she had borrowed US$3 500 from moneylenders because demands from banks were too prohibitive.
“Borrowing from banks has proved to be a challenge. I wanted cash fast and an easy loan but was turned off by the banks’ numerous requirements,” she said.
“And if you have provided the documents required, it will still take you a few days to weeks before your application can get approved, that is if it gets granted.”
She borrowed US$3 500, which she would pay back over six months at an interest rate of about 11,5 percent per annum.
“Some lending institutions make borrowing appear a lot easier and quicker. As in my case I was just asked to produce my identification card, confirmation of employment or proof of income, residential address and character reference before my loan was processed within 48 hours,” she said.
However, a victim of these institutions warned of the risk of offering houses and cars as security.
“They offer you attractive terms such as just surrendering your vehicle’s registration book or real estate property as guarantee for the loan, but at the end they can sell your car or house,” he said.
Online Reporter