Treasury Withholds Loan Remittances Amid Probe Into Illegal Lending Practices

Treasury admits withholding payroll-deducted loan remittances as part of a probe into illegal lending, citing excessive interest rates and violations of Zimbabwe’s financial laws (image source)

HARARE — Treasury has confirmed that it deliberately withheld the remittance of payroll-deducted loan repayments to banks and microfinance institutions for the past four months, saying the move was part of an urgent investigation into widespread violations of lending laws affecting civil servants.

In a statement released on Wednesday, the Ministry of Finance said the delays were not the result of a failure in public financial management systems but a targeted intervention aimed at protecting government employees from predatory lending practices.

“Over the past four months, Treasury acknowledges that there have been delays in the disbursement of payroll-deducted loan repayments to certain financial institutions. These delays do not reflect any breakdown in public financial management systems. Rather, they are the result of a deliberate and necessary intervention,” the statement said.

The probe was triggered by evidence that some banks and microfinance institutions were charging excessive interest rates and operating outside the law. Treasury cited breaches of the Moneylending and Rates of Interest Act [Chapter 14:14], the Microfinance Act [Chapter 24:29], and the common law in duplum rule, which bars interest from exceeding the original capital amount.

Investigations also revealed widespread non-compliance with regulations that cap loan repayments at 50 percent of a borrower’s net monthly salary. In some cases, civil servants were reportedly left with little or no disposable income after deductions, placing households under severe financial strain.

“This situation has created financial distress, limited access to basic household needs and heightened vulnerability to hardship,” Treasury said, adding that the intervention was necessary to safeguard public sector workers.

The temporary withholding of remittances enabled authorities to conduct a comprehensive compliance audit of all payroll-linked lenders and engage regulators, including the Reserve Bank of Zimbabwe (RBZ), on loan terms and interest structures. Treasury said payments have since resumed to all compliant institutions, with only two lenders still outstanding as regulatory issues are finalised.

Analysts say the episode highlights growing concern over the impact of microfinance lending on household welfare, particularly among low-income earners. While payroll-based loans have become a financial lifeline for many civil servants amid stagnant wages, critics argue the sector has suffered from weak oversight and exploitative practices.

Observers say lasting reform will depend on stricter enforcement of lending laws, improved transparency, and tighter supervision of microfinance institutions to prevent a repeat of the abuses uncovered during the probe.