‘State loan defaulters crushing govt’ [?!]

via ‘State loan defaulters crushing govt’ – DailyNews Live by John Kachembere  23 APRIL 2014

Government has been blamed for the high number of people failing to pay back State loans due to its failure to punish defaulters.

President Robert Mugabe reprimanded people who are in the habit of defaulting on their debt obligations, saying the culture was detrimental to the country’s economy.

“If you need funds, talk to the windows we created for you in your particular area, especially the small and medium enterprises,” Mugabe said during the 34th Independence celebrations in Harare last week.

“They are part of the mechanisms which add to the overall system of funding. But do not be a good borrower and a bad, bad debtor. A good borrower who is also a good debtor will repay the money.”

Economic experts said the Zanu PF-led government was now reeling from its own tactics of using loans to curry favour with the electorate.

“Historically, government has had a poor record of following loan beneficiaries and this created a misnomer in society,” said Kipson Gundani, Zimbabwe National Chamber of Commerce chief economist.

“People now view government funding as free money.”

Gundani noted that even borrowers who have the capacity to pay would be reluctant to do so knowing that no measures will be taken against them by government.

“If government was to make a follow-up on those who were given indigenisation loans, they would be surprised that not many projects were done and the people now

have no means of paying back,” he said.

This comes after Kevin Terry, the Central African Building Society managing director, told Parliament recently that over 70 percent of loans disbursed under the Youth Fund in the past four years have not been repaid, prejudicing the government of millions of dollars.

Terry said of the $4,4 million  that has been disbursed, the arrears currently stand at $2,3 million with a total of non-performing balances of just over $3,1 million.

Infrastructure Development Bank of Zimbabwe (IDBZ), which distributed over $500 000 worth of loans since 2009 recently indicated that a lot has to be done to ensure that people repay their loans.

Tawanda Mundawarara, the NMB Zimbabwe Holdings Limited (NMBZ) chairman, said the slowdown in the economy had increased the default risk.

He said impairment losses on loans and advances amounted to $16,6 million in 2013 compared to $4 million in 2012.

Mundawarara noted that NMBZ directors took a decision to write off loans and advances amounting to $1,2 million during the year under review after recovery efforts had not yielded the anticipated results.