Online Reporter
Lovemore Kadzura
Weekender Reporter
A BID by an unregistered village savings and loan club (mukando) to force its former secretary to repay more than 100 percent interest on borrowed capital has collapsed after a community court flagged the club’s operations as illegal.
The drama unfolded at Chief Makoni’s community court, where Takashinga Club of Nyahanga Village B, Headlands dragged its former secretary, Talent Dwadu of Plot 42, Wensleydale, demanding US$5 588 from the US$2 670 she borrowed last year to fund a cattle-fattening project with her former husband.
Club chairman, Biggie Andria said Dwadu, not only borrowed US$2 670, but also used other members’ names to access additional funds after reaching her borrowing limit.
She managed to repay US$1 657 before leaving for South Africa, leaving the club demanding the balance plus hefty interest.
Chief Makoni, however, ruled that the club’s claim could not stand, as its unregistered and illegal operations stripped it of the authority to enforce repayment terms.
“Dwadu was the club secretary. She owes us US$5 588, and she was appending her signatures each time she took the money. She later paid back US$1 657, and she now owes us US$3 931. She borrowed on different occasions, and also used other people’s names to withdraw money from the club. She used other names because we have a limit on how much a member can borrow from the club. Her initial debt without interest is US$2 670,” he said.
Dwadu did not deny owing the club, and told the court that she had invested the money in the cattle-fattening project she ran jointly with her former husband before their marriage collapsed.
“Yes, I agree that I borrowed from the club, and I signed that I owe the club US$5 588, but the amount included interest. I am willing to pay back the money, but I have to ask my husband to give me the money that I took from the club and used for our business. Right now I do not have the money as I am not working,” she said.
Chief Makoni noted that the club was operating as an unregistered entity, and had no right to offer loans for profit without registration by the authorities.
He also said the interest had ballooned contrary to general lending principles.
He ordered Dwadu to repay only the initial amount borrowed, and advised the club to formalise its operations.
“This club is not licenced as a microfinance institution or cooperative. The law does not permit the club to operate illegally. The club is not registered with any Government institution, yet it is carrying out profit-making activities of lending money. It is not paying any tax. This court cannot sanitise illegal activities by ordering Dwadu to pay interest to an unregistered club.
“However, the court is not losing sight of the fact that Dwadu borrowed money from the club. Dwadu borrowed US$2 670 from the club and has since repaid US$1 657. She now owes the club US$1 013. There is no interest to be charged by the club because it has no legal standing to do so. Also, according to the duplum rule, interest must not exceed the initial capital borrowed.
“Dwadu cannot drag her husband into this case because she is the one who borrowed the money from the club. She can, however, separately sue her husband to recover her money. Dwadu is ordered to pay US$100 for the next 10 months until she clears her debt. The club should register as a cooperative and operate within the confines of the law,” ruled Chief Makoni.
