Micro-finance companies must be investigated

THE advent of the foreign currency era, three years ago brought relief to many people, after it stopped the haemorrhaging of the local currency that was always under fire from inflationary pressures.

On surface, it was supposed to the right medicine to cure the economic problems that the country was facing and build a foundation for the revival that was expected.

The currencies we are using are stable in their countries and that was the expectation — that the use of the money will stabilise pricing of goods and services in the country.

However, like in the past, there have always been some vultures that look for loopholes to exploit the general public while lining up their pockets.

It is a shame, that because of the changeover of the currency, there has been laxity by some regulators to ensure things are done according to the book, giving the vultures the leeway to exploit the people.

Zimbabweans have been at the mercy of unscrupulous people who have in the process reduced the purchasing power of the currencies and now look like it is the same as our own local currency.

Regulators thought the use of foreign currencies, would bring in an open market where market forces would be left to dictate the direction of the economy.

Most of the vultures took advantage of the problems that were associated with the zim-dollar and simply continued as if there changeover did not bring any notable change.

One such sector is the financial sector and revelations coming out of micro-finance institutions show a picture of gross corruption and abuse of people’s money.

Micro-finance institutions have been taking advantage of the poor remuneration offered to many employees to exploit people leaving them with virtually nothing.

It is worrying that the Reserve Bank of Zimbabwe is only discovering the rot in these institutions more than three years later. It means some of these institutions have been exploiting people for the past three years quietly while building their empires from exploiting the poor worker.

First their interest rates defy the whole logic of the use of foreign currency. To give an example one of the micro-finance companies that was recently closed — McDowells International — which unfortunately is still hitting unsuspecting civil servants and other people — was operating like we were in 2008.

According to one testimony from a civil servant who was at the mercy of the greedy company, he borrowed US$180 in February this year and just four months down the line, the company had deducted $840 from his salary. This means the company was deducting US$210 per month. Simple calculations will show that the interest rate for such a transaction was a whopping 366 percent.

It means the monthly instalment of this loan was more than the loan itself. how can such injustice be allowed to happen in Zimbabwe?

With the salaries civil servants are earning, it means this person was no longer earning anything all for the sake of a US$180 loan. How can we allow such crooks to steal people’s money in daylight?