Business / Companies
Zimbabwe banks urged to reduce rates
07 May 2017 at 08:31hrs | Views
The Movable Property Security Interests Bill that proposes the use of livestock as collateral for bank loans might not be useful if financial institutions do not reduce the interest rates to between 4% and 7,5%, farmers have said.
Government is currently working on the Bill that seeks to provide for movable property, including cattle and goats, to be used as security for the purpose of obtaining loans.
The movable property or assets will include any tangible property such as motor vehicles, jewellery, equipment and machinery, household goods and livestock, among others. They also encompass intangible goods that are not fixed to a location, including services, intellectual property, and negotiable instruments such as bank notes and bills of exchange.
Thus, the Bill will enable borrowers and lenders to recognise movable assets as collateral, thereby supporting credit financing secured with such assets. The Bill is meant to facilitate increased access of credit to micro, small and medium enterprises and communal farmers since they will be able to use their movable assets as collateral, thereby promoting financial inclusion.
However, farmers who spoke to Standardbusiness last week said the credit lifeline would not be enjoyed as long as lending rates remained on the high side.
Farmers said micro-finance institutions were charging as much as 25% interest per annum for loans, while big financial institutions charged between 12% and 15%.
The Reserve Bank of Zimbabwe recently directed micro-finance institutions to cap their interest rates at 12% per annum on lending.
"The Bill is a welcome development to us as farmers. We have been complaining about that [lack of financial inclusion] for a long time. But we [now] have challenges with interest rates," Zimbabwe Commercial Farmers' Union president Wonder Chabikwa said.
"Since 2009, interest rates have been bad and not suitable for agricultural growth. This has seen farmers being choked. We believe the lending rates should be reduced because if it doesn't change, it will not benefit the farmers. We are advocating for interest rates of between 4% and 7,5%."
Chabikwa said farming as an industry was presently being strangled by non-performing loans (NPLs) borrowed from financial institutions between 2009 and 2012. He said banks had since started taking legal action against farmers who were failing to service the funds borrowed.
Loans during that time were being accessed at interest rates of as high as 35% per annum at a time banks in the region were offering loans at an annual interest of between 4% and 10%.
He said being a primary industry, farmers remained overburdened by NPLs and as a result, they would not be able to produce effectively.
A farmer, Davison Norupiri said what was acceptable were interest rates ranging between 5% and 7%, saying anything beyond that would overburden farmers.
"Farming is something that gives you income once a year and if you borrow expensive funds, they will definitely eat into your pocket. Interest rates of between 5% and 7% are welcome and those loans should be long-term, preferably beyond 12 months," Norupiri said.
"Once that Bill goes through, the banks should come on board and play their part. Otherwise we may have serious challenges."
Norupiri also urged farmers to pay back their loans in order to build trust with financial institutions.
He said the Bill empowered farmers and would help grow Zimbabwe's economy, which was agro-based.
A Gwanda-based farmer, Solomon Linda said: "That [using livestock as collateral] is a great idea and we welcome it as farmers in rural areas. At the moment, it is very difficult for farmers in rural areas to access loans because banks, unlike in urban areas, do not regard their homes as collateral. The only thing that can work for farmers in rural areas is livestock."
Umguza Agricultural Society chairperson, Shadreck Mabote said the Bill would bring relief to farmers as they had been struggling financially for a long time due to failure to access loans.
"Most of the land is lying idle because farmers do not have money to fully utilise it. Government has realised that and we welcome it 100%," Mabote said.
Matabeleland North provincial agricultural extension officer, Dumisani Nyoni said the Bill would bring relief to most farmers who had been struggling to access loans due to lack of collateral.
"At the moment, most farmers do not have immovable property in urban areas that could be used as collateral. As such, they have been struggling to access loans. We have been pushing for that but some were saying the livestock should first be insured before they can be used as collateral," he said.
The Bill is part of government efforts to improve the ease of doing business. Zimbabwean banks, which are the traditional sources of funding, are reluctant to provide loans to small to medium enterprises (SMEs) and individuals who do not have collateral in the form of immovable properties. Lending to SMEs and individuals is regarded as high risk, hence the demand for collateral.
Government is currently working on the Bill that seeks to provide for movable property, including cattle and goats, to be used as security for the purpose of obtaining loans.
The movable property or assets will include any tangible property such as motor vehicles, jewellery, equipment and machinery, household goods and livestock, among others. They also encompass intangible goods that are not fixed to a location, including services, intellectual property, and negotiable instruments such as bank notes and bills of exchange.
Thus, the Bill will enable borrowers and lenders to recognise movable assets as collateral, thereby supporting credit financing secured with such assets. The Bill is meant to facilitate increased access of credit to micro, small and medium enterprises and communal farmers since they will be able to use their movable assets as collateral, thereby promoting financial inclusion.
However, farmers who spoke to Standardbusiness last week said the credit lifeline would not be enjoyed as long as lending rates remained on the high side.
Farmers said micro-finance institutions were charging as much as 25% interest per annum for loans, while big financial institutions charged between 12% and 15%.
The Reserve Bank of Zimbabwe recently directed micro-finance institutions to cap their interest rates at 12% per annum on lending.
"The Bill is a welcome development to us as farmers. We have been complaining about that [lack of financial inclusion] for a long time. But we [now] have challenges with interest rates," Zimbabwe Commercial Farmers' Union president Wonder Chabikwa said.
"Since 2009, interest rates have been bad and not suitable for agricultural growth. This has seen farmers being choked. We believe the lending rates should be reduced because if it doesn't change, it will not benefit the farmers. We are advocating for interest rates of between 4% and 7,5%."
Chabikwa said farming as an industry was presently being strangled by non-performing loans (NPLs) borrowed from financial institutions between 2009 and 2012. He said banks had since started taking legal action against farmers who were failing to service the funds borrowed.
Loans during that time were being accessed at interest rates of as high as 35% per annum at a time banks in the region were offering loans at an annual interest of between 4% and 10%.
A farmer, Davison Norupiri said what was acceptable were interest rates ranging between 5% and 7%, saying anything beyond that would overburden farmers.
"Farming is something that gives you income once a year and if you borrow expensive funds, they will definitely eat into your pocket. Interest rates of between 5% and 7% are welcome and those loans should be long-term, preferably beyond 12 months," Norupiri said.
"Once that Bill goes through, the banks should come on board and play their part. Otherwise we may have serious challenges."
Norupiri also urged farmers to pay back their loans in order to build trust with financial institutions.
He said the Bill empowered farmers and would help grow Zimbabwe's economy, which was agro-based.
A Gwanda-based farmer, Solomon Linda said: "That [using livestock as collateral] is a great idea and we welcome it as farmers in rural areas. At the moment, it is very difficult for farmers in rural areas to access loans because banks, unlike in urban areas, do not regard their homes as collateral. The only thing that can work for farmers in rural areas is livestock."
Umguza Agricultural Society chairperson, Shadreck Mabote said the Bill would bring relief to farmers as they had been struggling financially for a long time due to failure to access loans.
"Most of the land is lying idle because farmers do not have money to fully utilise it. Government has realised that and we welcome it 100%," Mabote said.
Matabeleland North provincial agricultural extension officer, Dumisani Nyoni said the Bill would bring relief to most farmers who had been struggling to access loans due to lack of collateral.
"At the moment, most farmers do not have immovable property in urban areas that could be used as collateral. As such, they have been struggling to access loans. We have been pushing for that but some were saying the livestock should first be insured before they can be used as collateral," he said.
The Bill is part of government efforts to improve the ease of doing business. Zimbabwean banks, which are the traditional sources of funding, are reluctant to provide loans to small to medium enterprises (SMEs) and individuals who do not have collateral in the form of immovable properties. Lending to SMEs and individuals is regarded as high risk, hence the demand for collateral.
Source - the standard
