Zimbabweans drowning in debt

Over 90 percent of borrowings from micro-finance institutions (MFIs) are for consumptive spending, leaving the majority of Zimbabweans highly indebted, a scholar said today.

MFI’s have a loan book of about $170 million, but only nine percent was directed towards productive use while the remaining amount was consumptive borrowing, Tendekayi Mutambanadzo a lecturer with the National University of Science and Technology (NUST) told a micro finance public forum held by Zimbabwe Association of Micro Finance Institutions (Zamfi) in Bulawayo.

The trend follows that in mainstream banking, with the latest Banking Sector Report showing that of the loans and advances amounting to $3.64 billion for the quarter ended 31 March 2014, most of the bank lending was skewed towards consumptive lending.

Non-performing loans account for 18.5 percent of loans and advances by Zimbabwean banks worth, about $700 million, way above the internationally accepted five percent.

The Reserve Bank of Zimbabwe has since created a special purpose vehicle to acquire non-performing loans from banks, the Zimbabwe Asset Management Corporation (ZAMCO), as part of initiatives to clean up and strengthen banks’ balance sheets and provide them with the liquidity to fund valuable projects in the economy.

“The majority of Zimbabweans are highly entrenched in debt,” Mutambanadzo said, but did not give figures.

“We should be forewarned that a huge appetite to borrow is a good barometer that one is living beyond one’s means. As a rule of thumb, as Zimbabweans we should learn to start living within our means. We are already drowning in debt, the rule to be observed is, if you are in a financial hole, stop digging because the more you continue digging the more you sink.” said Mutambanadzo.- The Source

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