Zimbabweans pledge property for loans

Zimbabweans are increasingly pledging household items such as beds, fridges, and other personal property as collateral to secure small loans from financial institutions, highlighting the dire state of credit access and economic hardship faced by many families.

As inflation and unemployment persist, financial institutions are targeting the working poor with asset-backed lending products. While these loans provide vital access to cash, they carry growing risks of turning into predatory credit practices that imperil already vulnerable households.

The Reserve Bank of Zimbabwe (RBZ) flagged this worrying trend in its 2025 Mid-Term Monetary Policy Statement, cautioning against the social risks associated with loans secured by movable household assets and calling for stronger regulation and consumer protection measures.

RBZ Governor Dr. John Mushayavanhu revealed that as of June 30, 2025, the Collateral Registry recorded 3,329 active registrations of movable assets used as loan security, with a combined principal value of ZiG56.3 billion. Microfinance institutions accounted for the highest number of registrations (1,384), followed by banks with 1,167.

"Banks held the largest value of movable collateral at ZiG32 billion, while law firms registering on behalf of clients accounted for ZiG23.9 billion," Mushayavanhu noted.

Since its establishment in November 2022, the Collateral Registry has processed over 7,000 security interest notices covering a wide range of assets, including household goods, private vehicles, trucks, agricultural equipment, and shares.

Household goods remain the most commonly pledged collateral, with 4,006 registrations, followed by private vehicles (2,597), Notarial General Covering Bonds (1,661), trucks (1,440), and agricultural equipment (955).

The Reserve Bank's policy statement also acknowledged complaints against microfinance institutions related to predatory lending. While overall compliance with the Microfinance Act and Consumer Protection Framework was satisfactory, some institutions have faced scrutiny for non-compliance issues such as disposing of clients' assets without court orders and excessive monthly deductions.

"Supervisory actions have been instituted against non-compliant lenders, and the Reserve Bank will intensify market conduct surveillance to protect consumers," Mushayavanhu said.

Interest rates on loans from microfinance institutions varied widely, with some charging as high as 25% per month, well above the recommended range of 7% to 15%. The RBZ has pledged corrective measures to enforce responsible pricing practices and prevent over-indebtedness.

The Central Bank emphasized that all lending institutions must adhere strictly to the Microfinance Act and the Consumer Protection Framework, which establishes minimum standards for fair treatment of consumers.

Despite these challenges, Mushayavanhu assured that the banking sector remains largely stable and sound, though some institutions are facing prudential issues that require supervisory attention.

With wages stagnant and formal credit hard to come by, Zimbabwean families are caught in a difficult bind—pledging essential assets to secure short-term loans while facing the risk of losing vital household goods. The RBZ's call for tighter regulation aims to strike a balance between expanding credit access and safeguarding consumers from harmful lending practices amid Zimbabwe's fragile economic recovery.