I have said it before that uncontrolled debt seems to be the national sport of Zambia. I am constantly coming across entreprenuers and individuals that seem to think that the only solution is to borrow more and more money.
More horrifiying is the use of loan sharks as a way of raising money. Loan sharks that charge up to 30 per cent per month interest.
I blame the traditional debt collector mainly for this, as they put immense pressure on the debtor without any due concern for the consequences of their actions. With the pressure coming from the debt collector, I can see that the only way out is to look for another loan to get rid of him or her.
However, just please realise that this is not the way, unless it is truly a very short-0term loan and you have a definite way to pay it back, do not go to a loan shark, you will never be able to pay them back without destroying your dreams or even losing your car or home.
Remember a K30,000 loan will cost you K6,000 for one month, your loan will have doubled in four months, and four times more in a year. Loan sharks normally take your white book or your physical car as security and believe me, they make a fortune selling your car after you missed a couple of payments.
At present there is one legal law on your side however, if you can, refuse to pay them and make them take you to court.
Firstly the court will only consider an interest that is less than or equal to the capital borrowed. In other words the Zambian law states that no one can charge more interest than the initial capital loan.
Secondly, if you can get your day in court, admit to the principal debt and offer a monthly payment, the judge will more often than not, allow this and give the loan shark summary judgment with an agreed repayment plan, but happily, they will freeze the loan interest and allow only the bank rate to be charged from the judgment on-wards.
This rate is 9 per cent per year, some 300 per cent less than what you were being charged before.
The Government must regulate the micro finance and make sure it incorporates all lenders, not just the registered ones, simply make a ceiling of interest charged at a decent rate, say 30 per cent over bank rate per year as a maximum.
This will get rid of all the back street lenders and save countless Zambians from a life of stress.
Whilst I certainly do not condemn the loan or micro finance company and I do understand the risks of a delinquent account, I do attack the greed that they show in charging interest rates of over 300 per cent per year, more particularly when they take security on the loan.
There is lots of overseas money available at interests as low as 5 per cent per year, even unsecured and high risk money is available to micro finance houses at rates of 60 per cent per year, why then do we, as a country allow these people to make so much profit out of the misery and suffering of our fellow Zambians.
In the same vein, I am asking the Government to regulate the debt collector industry, to control the certified bailiffs, not the state bailiffs but the ones that obtained licences to be able to call themselves certified bailiffs without any financial back up, with no training and in most cases just out to get as much money in fees as possible.
I have seen many cases were these people flout the law or lack of it and simply get their way by instilling fear.
Remember, the law is on your side, they must give you written notice before they fore-close or evict. They must give you a letter of demand with full details of the claim against you.
The law does not allow them to simply harass you for an amount of money that they demand verbally from you, you are entitled to have statements, invoices, letters and contracts that prove your debt.
Be wary that a verbal contract is binding but it has to be proved, they cannot sue you just because they say that it was agreed verbally, was there a witness to the agreement, and has there been a precedence?
By this I mean that if you have paid an amount of interest for a month or two, you cannot argue that the interest was never agreed.
This happens a lot with the loan sharks where no written contracts exists, you borrow K20,000 and agree to a 30 per cent interest.
You don’t pay them after a month and they don’t ask for a new contract, if you then pay nothing else, in law this would be interpreted as a one month contract where you owe them just K20,000 plus the interest for one month, and any extension would in effect have no relevance in court as there was no contract to that effect.
By British law, the creditor would have to have had terms signed and accepted by you, clearly stating that the loan will attract interest on all out-standing amounts.
I have been involved in debt management for over 30 years and have never used force or harassment to recover debts, there is simply no need. Nor is there a need for legal repossessions, If you do your job properly and treat the debtor with empathy and respect, you should be able to recover the debt without any unpleasantness.
By simply looking at your companies desposable income, and by negotiating with the creditor, we can always come up with a mutually beneficial solution.
However, this does not help the majority of you that are reading this and saying, its all well and good to tell me now, but I am one of those that have borrowed from numerous organisations and loan sharks, what can I do.
In the UK, my company helped thousands of people and companies alike to ease their debt situation by utilising “Debt Consolidation” and having seen the dramatically bad situation that Zambians are in with respect to debt, we have brought this company and its “Debt Consolidation” to Zambia.
Simply, we act as a friend that will negotiate with all your creditors, those that you owe money to, on your behalf.
By talking to your creditors, we can take away all the nasty telephone calls and visits that you or your company are having daily now. We can sometimes negotiate lower settlement amounts if you have capital available and we can certainly help you take away all the stress.
There is a solution to your debt issues, a solution that does not need you to obtain yet another loan to be able to repay the initial loan.
All or most creditors will embrace a debt consolidation system where they receive regular repayments as against silence and no financial movement at all.
Unfortunately the old belief of simply not paying your loans or debts will not work any-more. Today, you will not be allowed to get away without paying your debts, and the consequences of defaulting are very severe.
The CRB will record your delinquent status and this will preclude you from any accessing any future bank loans for a seven-year period, and will have a very serious impact on your future.
You need therefore to talk to your creditors, you need to pay them something each month, you need to show them that you are trying your very best to repay them no matter what.
Debt consolidation through Blakemore Morris, will do all this for you and can certainly make your life less stressful.
Equally companies that are presently being strangled by their debt can benefit from this thinking. By arranging a regular repayment to your creditors, you will have a known cash flow, a regular cost and a pre-determined period during which you will be able to clear all of your debts totally.
Companies and even large corporations cannot expand when they are bogged down with debt. They need to sort it our and get a level playing field.
Debt is simple caused by bad management. Sorry, but it is true, there is no situation were you, or your companies debt could not have been avoided by pro-active management.
Often too quickly, companies will go to the banks and obtain loan money, and in most cases this is achieved using a fictitious business plan, a non existent strategic plan, no exit plan and quite honestly no hope of success.
I am still waiting to find a company that follows its business and strategic plan, everyone I have seen cannot even find it, it was simple a document that the bank asked for, you had it prepared by some consultant who knew nothing of your company nor the business and you then threw it away.
This is simple the basis of “ Crisis Management” and believe me, no one has ever been truly successful adopting crisis management as their business model.
Can you imagine a bank manager’s reaction, if you went to him and asked for a K400,000 loan for your business.
When he asked leading questions like, have you under-taken a marketing assessment, a product evaluation, do you know what you will do next year, where is the company going to, how will you over-come the threats.
Is the money sufficient for your needs, do you know what you are going to spend it on? You answer him that you have no idea. You have no plan, it was just an idea you had conceived in the Pub. Don’t blame him if he throws it out.
But this is the case of most business loans, no realistic plan, certainly no strategic plan, no swot analysis, no market appraisals, no product comparison. Just an idea and your mate’s business plan changed to suit your needs.
No wonder we are all in Debt !!!!!!
The Author is CEO of Blakemore Morris and the Business Academy