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Financial initiatives are depleting resources, observes EAZ

Financial initiatives are depleting resources, observes EAZ
By Chiwoyu Sinyangwe
Saturday July 19, 2008 [04:00]

ECONOMICS Association of Zambia (EAZ) has observed that most of the financial initiatives being introduced by financial institutions in the country are depleting resources at household level and creating poverty. EAZ national secretary Chibamba Kanyama, who also echoed recent complaints by finance minister Ng'andu Magande that civil servants are now going with negative pay every month, explained household security in terms of income stability was non-existent as most workers had gone on a borrowing spree for short-term needs.

Kanyama attributed the growth of micro-finance business in the country to the margins or spread which he said were extremely huge.

“It is just a matter of time before government makes a decision to shake the personal loans initiatives driven by micro finance and banking institutions,” Chibamba said. “This is because most of them have borrowed beyond the normal margins of 55 per cent of basic salary.

The government has also been overwhelmed by the number of deductions they have to make on behalf of the tens and tens of micro lenders and though there is a bit of commission, it does not sufficiently compensate for the time and technological investments.

The highest growing industry in Zambia is in the micro-lending business; and this number has grown beyond 100 for the 400,000 individuals in formal employment.”

He also said instead of developing savings schemes that support household, economic and institutional development, individuals were overwhelmed by the cash being offloaded by the financial institutions and the “savings are reducing each day.”
And Kanyama said most Zambians offered themselves to the micro-financial institutions because they were desperate for cash.

“They offer themselves to be exploited and the cycle of poverty is created. Debt can be very addictive for undiscerning borrowers and this has caused instability at household level,” said Kanyama. “Most of the micro-lenders do not take time to advise individuals about the dangers of going beyond saying borrowing parameters and even understanding the cost of debt in real terms.”

Labels: EAZ, MAGANDE

posted by MrK @ 3:45 AM