An easy meal for loan sharks

WHEN one falls short of cash, the temptation to borrow is irresistible, but most often no one seems keen to bail out those who are desperate. However, there are those questionable individuals and organisations people turn to — the loan sharks — who readily extend their support knowing full well there will be hell to pay for failing to repay their dues.

While the money can be loaned out instantly, there is, always, a catch: the interest rates and repayment terms are so steep that most beneficiaries are unable to repay.

Of late, desperate citizens, most of whose incomes have been affected by both the lockdown and inflation, have been fair game for loan sharks. An investigation by The Sunday Mail Society revealed that a number of people are now counting their losses after mortgaging their valuable properties and assets to these“vultures ”. Currently, some of these institutions are offering loans at exceptionally high interest rates, which go as high as 120 percent.

Essentially, most borrowers are getting short-term reprieve for long-term pain.

But the victims — individuals, informal traders, small and big operators — claim they have no other option. There is everything to gain for the convenient lenders, also known as the “blade mafia”, as they attach property that is usually way above the value of the loan.

Falling prey

Most victims have heart-wrenching accounts. Some have received death threats in addition to losing property.

“I surrendered my smartphone, stove, flat screen television and a home theatre as surety for a US$ 650 loan,” revealed Frank Mbete (29).

He was charged 50 percent interest for the short-term loan. However, things quickly went south. “I failed to pay back the money and lost everything. Strangely, the property was valued more, but they still demanded I pay an additional interest, failure of which would lead to my demise.”

Michael Chitura (not real name) is currently living in fear. He was hunted by a loan shark to the extent of considering taking his own life.

“I was laid off from work just after borrowing money. I needed rent, among other things. But the loan shark couldn’t be bothered, all he wanted was his money back,” said Michael.

“Were it not for my cousin, I would be history by now. He lent me money to service the loan . . .”

Thriving operations

Last week, we met one of the leading loan sharks, Munyaradzi, in the capital.

Munyaradzi runs a number of thriving small ventures, most of which he took over after the owners failed to service his loans.

He is the owner of the unlicensed Solutions To Empower People Company Limited ( STEP), which offers loans to ordinary individuals, civil servants and small businesses. Munyaradzi said most micro finance institutions are run by illegal money changers.

“I am still working on papers to get a micro-finance lending licence and that is the case with most of my peers. Some do not even bother making their operations official,” he said.

Interest rates, he said, are not uniform. “First-time clients pay more compared to a person we are dealing with for a second or third time. It also depends on the prevailing economic situation or circumstances. In fact, there is no a formula used. However, we are so particular about surety,” said Munyaradzi.

Another loan shark, Isaac Chidzvete, runs a business that sells electronic gadgets in the Central Business District ( CBD) to cover up for his money lending venture, which is his cash cow.

“I have a stream of people who want to borrow anything above a thousand in hard currency at any given time . . . We do not deal with complete strangers, somebody in our chain or an existing or past client has to introduce a newcomer.”

Most lenders collect up to three months’ interest even before the loan has been fully serviced.

Why deal with crooks?

However, the Zimbabwe Association of Microfinance Institutions (Zamfi), the sole association of microfinance institutions in the country, said their members’ operations are guided by Reserve Bank of Zimbabwe’s regulations. Zamfi chairperson Mrs Virginia Sibanda said it is imperative to keep transactions official.