NSSA clamps down on interest rates

The general manager, James Matiza, told bankers last week that it would be a condition of any finance provided by NSSA to banks after August 1 that it was lent to businesses at an interest rate of no more than 15 percent.

No matter what period the loan was for, from 30 days to 365 days, the interest rate should be no more than this amount. That might not make economic sense normally but Zimbabwe’s economy at present was not normal, he said.

NSSA would lend the funds to the bank at an interest rate of 10 percent. The banks could add on a profit margin of up to three percent and levy handling and other charges amounting to no more than two percent, resulting in an overall cost to the borrowing business equivalent to no more than 15 percent.

Matiza said NSSA, like social security funds elsewhere, tried to contribute to employment creation and retention by providing banks with money for onward lending to businesses.

He said NSSA was not able to contribute as much in this regard as better endowed social security schemes elsewhere, due to its collecting a maximum combined contribution from a person in employment and his employer of only $12 per month.

Nevertheless at the end of June NSSA funds totalling $180 million were circulating among banks for onward lending to businesses.

He said the NSSA board was concerned that banks were on-lending the money at exorbitant interest rates and adding on exorbitant handling charges as well.

“The worrying thing is that we are trying to help companies survive but if you lend the money to companies at a 40 percent or 60 percent interest rate, we are not helping the companies at all,” he said.

He cited the case of a company in which NSSA is a shareholder for which $4 million was made available through one bank, which took $800 000 off this amount in handling fees and added a substantial rate of interest, leaving the company with only $2,7 million.

Bank clients who were lent NSSA funds should be made aware of the source of the funds, so that they realised that in the event of the bank collapsing, the loans still had to be paid to NSSA.