SHYLOCKS MUST BEHAVE, ABIDE BY LAW

Madam,

Micro money lenders, popularly known as ‘shylocks’ are intended to serve as a vital resource for those with limited access to traditional banking services. It is crucial that they operate ethically and within the boundaries of the law. Unfortunately, this is not always the case, and many borrowers find themselves ensnared in cycles of debt due to exorbitant interest rates and poor customer service.

They withhold ATM cards and IDs of customers illegally. Some harass customers in their workplaces.
Microfinance was established with the noble goal of empowering low-income individuals and entrepreneurs by providing them with access to capital. For many, these small loans represent their only opportunity to invest in a business, improve their living conditions, or manage unexpected expenses.

However, the reality is that some micro lenders exploit the vulnerabilities of their customers by charging interest rates that not only exceed legal limits, but also create a precarious financial situation for borrowers. The consequences of such predatory lending practices are dire. Families often find themselves trapped in a vicious cycle of debt, struggling to meet repayment obligations that seem insurmountable. This situation can lead to increased financial stress, mental health challenges and the disintegration of familial and community ties.

Worse off than before
It is disheartening to see individuals who seek assistance end up worse off than before, all due to the unethical practices of certain lenders. I urge all micro money lenders to comply with legal interest rates and to treat their customers with the respect and dignity they deserve. Transparency is of utmost importance.

Borrowers should receive clear, comprehensive information about the terms of their loans, including interest rates, fees and repayment schedules. It is essential that customers fully understand their obligations before committing to any agreement. By ensuring clarity and transparency, lenders can foster a sense of trust and empower borrowers to make informed decisions.

Moreover, it is crucial for lenders to adopt a customer-centric approach. This means employing trained staff who can provide financial education and support to borrowers. By offering guidance on budgeting, saving and responsible borrowing, micro money lenders can help customers navigate their financial journeys more effectively.

Repay their loans
When borrowers feel supported, they are more likely to succeed and repay their loans, creating a win-win situation for both lenders and borrowers. In addition to ethical lending practices, I implore regulatory bodies and policymakers to strengthen oversight of the micro finance sector. There must be stringent enforcement of laws governing interest rates and lending practices.

Individuals should be able to report predatory lending behaviour without fear of retaliation. By holding lenders accountable, we can create a safer environment for borrowers and ensure that micro finance achieves its intended purpose of promoting financial inclusion and empowerment. Furthermore, community awareness and education about consumer rights are vital. Many individuals may not be aware of the legal limits on interest rates or their rights as borrowers.

By providing resources and information, we can empower consumers to make more informed choices and advocate for themselves. The micro finance sector holds immense potential to uplift communities and foster economic growth.

However, this potential can only be realised if micro money lenders commit to ethical practices, charge legal interest rates and treat their customers with care and respect. It is time for us to demand accountability and advocate for a financial landscape where everyone has the opportunity to thrive without falling prey to exploitation.
Patson Maseko

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