16 March 2012

Zimbabwe: Loan Sharks Swallow Civil Servants

Most workers, particularly civil servants, have become servants of loan sharks forcing Government to tighten money-lending laws to prevent exploitation through exorbitant interest rates.

Secretary for Finance Mr Willard Manungo yesterday said borrowers are being charged huge interest rates, which in most cases they fail to repay.

He was giving oral evidence before a Parliamentary Portfolio Committee on Small-to-Medium Enterprises.

He said there was a vicious cycle where one would return to borrow money once he had made full repayments with interest because the loan would have left a person worse off.

"We do not want our civil servants to fall victim to loan sharks. We need to instill discipline because these loan sharks will continue to take advantage," he said.

He said Government was also concerned about the huge interest rates charged on loans by financial institutions.

Mr Manungo said there might be need for a legal instrument to instill discipline in the sector.

"There is a mismatch between what the depositor is getting and a borrower is being charged. We are still debating whether to come to Parliament so that there is a legal instrument or we use moral persuasion," said Mr Manungo.

"There is a disparity between depositor rates and lending rates."

On SMEs, Mr Manungo said Government acknowledged the significant role they played in creating employment, exports generation and contributing to the Gross Domestic Product. Government, he said, had provided funding to the sector, but the quantity of the money was largely determined by the available resources.

Legislators also wanted to know if Government was considering levying taxes to the informal sector.

Mr Manungo said a way would be looked into to enable them to pay taxes. He was, however, quick to say people in the informal sector were already paying taxes through Value Added Tax, import duty among others.

Legislators also expressed concern on the Small Enterprises Development Corporation, which they said was not properly accounting itself.

Mr Manungo said while there was need to improve accountability mechanisms at Sedco, the institution was generally accountable. Chikomba East, MP, Cde Edgar Mbwembwe (Zanu-PF) asked whether Sedco was still relevant in a society where financial institutions were also providing funding.

Mr Manungo said while some of its roles have been taken over by financial institutions it remained relevant.

Copyright © 2012 The Herald. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.