Zimbabwe: Moneylenders step in where banks refuse to tread

| June 29, 2015

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Tawanda Gwata is terrified. The 42-year-old farmer borrowed $6,800 US to grow three hectares of Virginia tobacco. But then, he says, “The rains ruined my crop’s leaves. I only reaped $3,100 [at auction].” Now he is waiting in fear for the moneylender.

Mr. Gwata borrowed money from a local agent of one of the shadowy businessmen who are flooding into Zimbabwe’s towns. Last week, the agent demanded that he surrender his tractor as a guarantee that he will repay the money over the next year.

Tobacco is Zimbabwe’s most important cash crop. In 2014, the national harvest brought in a record $879 million US. For several years, bumper crops have meant that farmers can pay off loans and enjoy surplus cash after buying food, clothing and school fees. Many small-scale farmers, especially women, bought houses, motor vehicles, and cattle with their windfall profits.

But this year, heavy rains and a subsequent drought ruined crops in the field. Farmers rioted on auction house floors when they discovered how much they had lost—and realized what they owed to unscrupulous lenders.


Tobacco auction. Photo: Ray Mwareya

Anold Beke is a crop grader at Zimbabwe’s Agricultural and Rural Development Authority. He says many new, inexperienced farmers brought poor quality tobacco to the market. Mr. Beke continues, “Farmers harvested what we call ‘primings’—low-grade tobacco leaves.”

Tobacco prices across Zimbabwe crashed from $4.85 US to just ten cents per kilogram. Farmers’ livelihoods collapsed along with the tumbling prices. Mr. Gwata’s spoiled harvest means that he, like many rural farmers, now lives in fear of moneylenders.

According to farmers and local officials, moneylenders use several methods to coerce farmers to repay loans. They seize tractors, ploughs, cattle, vehicles, or generators and sell or hold them until debts are settled. They may also claim part of the next harvest until debts are cleared. There are reports of beatings and assaults by hired thugs.

Many new farmers in places like Hwedza district, 120 kilometres southeast of the capital city, Harare, decided to grow tobacco because they see it as a good moneymaking opportunity. But banks flatly refuse to lend to small growers because they have little or no collateral.

So many farmers are forced to borrow from illegal or informal moneylenders. There can be serious repercussions when farmers can’t repay loans. Mr. Gwata explains, “Established western banks … refuse us credit because we have no title deeds on our plots. Unregistered Chinese lenders come to our ‘rescue.’ ”

Divorced women and widows make up about a third of the 80,000 who have recently turned to tobacco farming. Most grow tobacco because they have no other way to provide for their families. Unfortunately, women farmers are easy targets for lenders when they fail to repay their loans.

Jan Kwenzani is a gender researcher at Women Livelihoods Trust Zimbabwe. She says, “These cash sellers are most vicious on female growers.” Stella Pfebve is a case in point. The farmer borrowed $5,000 US, but made only $2,840 US in sales. Mrs. Pfebve says, “Ruthless lenders seized my two milk cows and ox-cart in May.”

But there may be a light at the end of the tunnel. The Zimbabwean government is a drafting a law to force the country’s banks to lend money to farmers.

Mr. Gwata is convinced that the future is bright for tobacco farmers. He is preparing his land for next growing season. But he is bitter about the current situation. He says, “We just want safe credit.”