Zimbabwe accepts cows as collateral for loans

As the economic situation in Zimbabwe continues to decline, the government has decided to bring in innovative ways to unlock the blocked capital in the country. Zimbabwe will soon allow the payment of school fees using livestock or by labor to encounter the problem of cash crunch. It has also started to accept cows as collateral for loan from banks.

The Primary and Secondary Education Minister of Zimbabwe, Dr Lazarus Dokora stated that school authorities must be flexible and should ensure that those who do have money to pay for tuition fees can work. Rural areas could make their payment using livestock and schools in the cities can be paid by working at the school.

THE MOVABLE PROPERTY SECURITY INTERESTS BILL

The Movable Property Security Interests Bill will soon be passed in Zimbabwe. The bill provides for the use of movable property like furniture, goats, cattle, cars, etc as collateral for the repayment of loan. This provides credit to small and medium scale business enterprises as 80% of Zimbabwean’s fail to get access to credit facilities due to lack of immovable assets. The party who will hold the property during the subsistence of the loan can be decided by a mutual agreement between the debtor and the creditor.

ANALYSIS

This system was put in place to tackle the problem of the cash strapped nation saw divergent views in the country. The country’s Teachers’ Association called for a change in this policy as they could not accept goats as a reward for their hard work.  

However, in the long run this policy introduced by President Robert Mugabe may cause excessive mismanagement and may lead to the problem double coincidence of wants. The absence of a common measure of value along with lack of divisibility of goods may cause failure of this policy and may worsen the prevailing economic crisis.

The government of Zimbabwe can take wiser steps to improve this situation by cutting down unnecessary expenditure on foreign trips of the ministers and by spending the little they have judiciously.  The government should not make the citizens suffer because of their corrupt actions.

Banks generally give loans on immovable property such as a site, commercial property or a house as it is safer compared to a movable property, where there is a risk of the debtor escaping with it. Thus the creditor can be in an unsecured position when he keeps movable property as collateral for the loan granted.

This policy will provide enough funds to boost the revival of the small scale industries. The development of small and medium scale enterprises will play a pivotal role in the economic development of the country.

ASSESSMENT

Introducing labor as a substitute for school fees can be seen as a revival of the arbitrary barter system prevalent in the historic age. Payment in the form of cattle will ensure education for the rural children but may receive negative claims from those who are paid in this form.

 The lack of productivity of the Zimbabwean farms is due to the shortage of capital to the farmers. The main aim of the movable collateral policy is to provide credit for the agricultural sectors to thrive and grow. Once these enterprises are funded, jobs will be provided to the people. Goods will be produced which when exported will earn foreign currency for the country. Thus the falling economy of Zimbabwe due to poor corporate governance and bad policies can be raised again.