Finance, Economic Development and Investment Promotion Minister Mthuli Ncube has acknowledged delays in the remittance of salary deductions to banks and microfinance institutions saying the move was a deliberate intervention to protect civil servants from what it described as widespread and unlawful lending practices.
In a statement, Ncube said the delays which have occurred over the past four months should not be interpreted as a failure of public financial management systems.
Instead, he said Treasury temporarily withheld the disbursement of payroll-deducted loan repayments as part of an urgent investigation into non-compliance by some lenders.
“These delays do not reflect any breakdown in public financial management systems. They are the result of a deliberate and necessary intervention by Treasury, executed in the context of an urgent and comprehensive investigation into widespread non-compliance by some lenders” said Ncube.
According to the statement, the probe was triggered by mounting evidence that certain banks and microfinance institutions were charging exorbitant interest rates in breach of Zimbabwe’s financial laws.
Treasury said some lenders violated the Moneylending and Rates of Interest Act, the Microfinance Act as well as the common law in duplum rule which prohibits interest charges from exceeding the original capital owed.
The ministry also found that several institutions were flouting regulations that cap loan repayments at 50 percent of a borrower’s net monthly salary.
“In some extreme cases civil servants were left with virtually no disposable income with 100 percent or more of their net earnings being absorbed by loan deductions,” Prof Ncube said.
Treasury warned that the situation had created serious social and economic consequences for affected workers including financial distress, limited access to basic household needs and increased vulnerability to hardship.
“These developments compelled Treasury to intervene promptly in order to protect the well-being of public sector employees and to ensure compliance with the law,” the minister said.
The statement said the temporary withholding of remittances was a targeted measure intended to allow a full compliance audit of all payroll-linked lenders while also enabling regulatory engagement with the Reserve Bank of Zimbabwe and other oversight bodies on the appropriateness of loan terms and interest rates.
Treasury said it had since resolved remittance issues with the majority of participating financial institutions with payments having resumed after confirmation of regulatory compliance.
Only two institutions remain under active review with discussions ongoing to resolve outstanding concerns within the framework of the law.
Prof Ncube said the government recognises the importance of the payroll deduction system in supporting access to credit, pensions, medical insurance and other essential services for civil servants.
“It is important to emphasise that the withholding of remittances was never intended to repudiate government’s obligations but rather to restore discipline and accountability in the lending process,” he said.
Treasury said it would continue working closely with regulators including the Reserve Bank of Zimbabwe and the Insurance and Pensions Commission to strengthen oversight and ensure all institutions operating within the Salary Service Bureau framework adhere strictly to the law.
The clarification follows growing concern among financial institutions and borrowers over delayed loan repayments as government intensifies efforts to enforce ethical and responsible lending across the financial sector.
