Mr Guri Final Project

NATIONAL UNIVERSITY OF SCIENCE AND TECHNOLOGY

GRADUATE SCHOOL OF BUSINESS

The Impact of Microcredit Practices on the Welfare of Civil Servants

A Dissertation by GURI JOHANNES (Student No. NO164571N)

A Dissertation Submitted in Partial Fulfillment of the Requirements for the Award of the Master of Business Administration in Public Management Degree

Name of Supervisor: Date of Submission

Dr. Kairiza 2 November 2017

DECLARATION

I, Guri Johannes, hereby declare that this dissertation is my own investigation and research, except to the extent indicated in the acknowledgements, references and by comments included in the body of the report, and that it has not been submitted in full or in part for any other degree to any other university.

_____________ Signed Student

___________ Date

______________ Supervisor

[i]

_______ Date

DEDICATION

This dissertation is dedicated to my late son Tawanda

[ii]

ACKNOWLEDGEMENTS

The priority is to thank the Mighty God for giving me the light, hope and strength amid turbulent challenges experienced in producing this research project. My sincere gratitude goes to Dr. Magadzire for the initial guidance and support when he was having health challenges and Dr Kairiza who perfected the document and eventually make it sail through amid unwarranted challenges. I am really thankful to Dr Kairiza. I also thank all civil servants for participating and responding to my questions.

District schools inspectors,

schools inspectors and heads of schools deserve a special mention for distributing and collecting questionnaires on voluntary basis. Many special thanks goes to my wife for the support in times of stress and lean financial times. Spiritual support from apostolic faith mission ministers (vafundisi) is well appreciated as they delivered confidence and visionary growth. I say thank you to Education Minister Dr. L. K. Dokora and Provincial Education Director, Mr C. Chiota whose encouragement and support drove me into seriousness and embarking on the programme up to completion. I really appreciate all the support and love from all who contributed in any way to my research project. I salute you.

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ABSTRACT

This study assesses the impact of microcredit or microfinance on civil servants in terms of welfare and performance. The study is restricted to civil servants in the education sector in Mashonaland East province. The study’s key four objectives focused on illegal practices and the exploitative nature perpetuated by Microcredit Finance Institutions ( MFIs), identifying the most affected group of education sector civil servants, the effects of microcredit and possible alternatives to funding. Microcredit has proved to have a negative effect on civil servants in the education sector. The major group affected fell within the 1 to 20 years’ experience in service. Major research respondents were civil servants (heads of schools and teachers), administration officers at district and provincial offices and MFIs directors and workers. Basic data collecting instruments used included questionnaires, focus group interviews and discussions and personal interviews with heads of schools and MFIs personnel. The research revealed that there is a paradigm shift in terms of microcredit development. The original microcredit targeted the poor and lowly paid and was project oriented. It was not characterized by stringent measures but focused on poverty alleviation, entrepreneurship and empowerment of borrowers. The new identified version now largely focus on MFI profitability and sustainability. Besides its immediate relief thrust, it has long term negative effects in the form of emotional stress , loss of dignity, domestic violence, absenteeism and poor performance. Overall, it is to some extent a lubricant to poverty. Another notable finding is the entrance of formal banks into this lucrative profit making venture through systematic exploitation of civil servants. The tricky usurious loans interests rates, enticing loan top ups and the length two- year repayment period

entangled civil

servants into a vicious cyclical debt web. In the process they lost household property after defaulting on repayments. Microfinance as a developmental tool, cannot stand alone in resolving the complex multi-dimensional problem of poverty. It has failed to offer the poor an opportunity to escape from their situation. Civil servants need financial discipline education and counselling in order to avoid further exploitation. The government should review upwards low salaries which have turned out to be the key independent variable with microcredit being an intervening variable though with deadly consequences.

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TABLE OF CONTENTS

Title

Pages (i) (ii) (iii) (iv) (v) (viii) (ix)

declaration Dedication Acknowledgements Abstract Table of Contents List of Tables List of Acronyms

1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 2.0 2.1 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10

CHAPTER 1 Introduction…………………………………………………………………….. Background to the Problem……………………………………………………. Statement of the Problem……………………………………………………… Research Objectives…………………………………………………………….. Research Question Justification For The Study……………………………………………………. Scope/ Delimitations Limitations Of The Study CHAPTER 2 Literature Review……………………………………………………………… Introduction……………………………………………………………………. A Brief Overview……………………………………………………………… Microcredit as a Developmental Tool…………………………………………. Negative Practices……………………………………………………………... Interest Rates…………………………………………………………………… Microcredit as a Variable……………………………………………………… Conceptual Framework………………………………………………………… Microcredit MFIs as Commercial Entities…………………………………….. Summary…………………………………………………………….

1 2 3 3 4 4 5 5 7 7 8 8 10 12 14 14 15 16

CHAPTER 3 3.1 3.2 3.3 3.4

Research Methodology………………………………………………………… Research Design……………………………………………………………….. Population……………………………………………………………………… Sample…………………………………………………………………………. CHAPTER 4

17 18 19 19

4.0 4.1 4.2 4.3 4.4 4.5 4.6.0

Data Presentation, Analysis and Interpretation………………………………... Introduction……………………………………………………………………. Data Analysis………………………………………………………………….. Most Affected Civil Servants…………………………………………………. Respondents…………………………………………………………………… Borrowing levels……………………………………………………………… Illegal Practices………………………………………………………………..

21 21 22 23 24 25 26

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4.6.1 4.6.2 4.6.3 4.6.4 4.6.5 4.6.6 4.6.7 4.7 4.8 4.9

5.0 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9

Repayment Mechanisms……………………………..……………………….. Credit Uses and Effect………………………………………………………… Interest Rates……………………………….………………………………….. Collateral Security……………………………………………………………... Loan Acquisition Process…………………………….………………………... Loan Purpose and Top Ups……………………………………………………. Borrowing……………………………………………………………………… The Emerging Conceptual Framework………………………………………… Alternative Sources to Funding………………………………………………... Summary……………………………………………………………………..

26 27 27 29 30 31 32 34 36 37

CHAPTER 5 Summary of Findings………………………………………………………….. Transformation of the Microcredit Industry ………………………………….. Bio data Implications…………………………………………………………… Repayment Mechanisms……………………………………………………….. Interest Rates…………………………………………………………………... Collateral Security …………………………………………………………….. Effects of Microcredit on Civil Servants………………………………………. Poor Welfare Concept………………………………………………………….. Conclusion…………………………………………………………………… Recommendations……………………………………………………………… Reference……………………………………………………………………….. Appendices………………………………………………………………………

39 39 40 40 40 41 41 41 42 43 45 48

(a) Questionnaires Appendix

1. Teachers and Government Workers 2. Heads of schools 3. Focus Group Survey Questions 4. Microfinance Institutions

(b) Fliers Appendix

1. Standard Chartered 2. Delta Financial Services 3. Credfin 4. Coverlink Finance 5. Solten Financial Services

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LIST OF TABLES Titles

Page

Fig1 Fig 2 Fig 3 Fig 4 Fig 5 Fig 6 Fig 7 Fig 8 Fig 9

Conceptual Framework Hypothesis and Key Research Objectives Most affected Civil Servants Respondents by Gender Borrowing Levels Interest Rates Collateral Security Items Loan Purpose Original Conceptual Framework

14 22 23 25 26 29 30 32 34

Fig 11

Emerged New Conceptual Framework

35

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LIST Of ACRONYMS DSI

-

District Schools Inspector

ESAP -

Economic Structural Adjustment Programme

MFIs -

Microfinance Institutions

NGO -

Non-Governmental Organization

POS

-

Point of Sale

RBZ

-

Reserve Bank of Zimbabwe

RTGs -

Real Time Gross

SI

Schools Inspector

-

SME -

Small to Medium Enterprise

ZAMFI -

Zimbabwe Association of Microfinance Institutions

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[ix]

CHAPTER 1 Introduction

1.1

Introduction. Microcredit has been touted as one of the instruments that can alleviate poverty and

problems of underdevelopment in communities (Spooner, 1846; Yunus, 2008; Barnajee and Duflo, 2002 and Samer et al, 2015). In light of that assumption, this study seeks to understand the impact microcredit has on civil servants in the education sector in Zimbabwe and in particular Mashonaland East province. Research on microcredit in Zimbabwe is largely aligned to the traditional approach where Microfinance is for the economically disadvantaged or the poor category who need entrepreneurial empowerment (Mago, 2013; Toindepi, 2015) However, it has proved to be evolving over the years, if we consider Spooner’s (1846) thrust and conception of credit and Yunus’s 1980s poverty alleviation concept and the current microfinance institutions (MFIs) operations and philosophy of profitability and sustenance. Instead of alleviating poverty and improving the welfare of beneficiaries as anticipated by early microcredit gurus, observation and findings revealed that microcredit has transformed and deviated from its noble idea as a poverty alleviation and a possible development tool to economically marginalised communities (Duvendack et al (2011). The reviewed literature though largely skewed towards South Asian and Latin American countries, highlighted two divergent views. Some authorities like Yunus (2008), Sriram (2006) and Barnajee and Duflo (2008) viewed microcredit as a poverty alleviation and a development tool. However, Copstake and Westover (2015) have the opinion that the development tool aspect was over exaggerated or over emphasised as negative results were also evident in microcredit beneficiaries. It has been observed that MFIs are also focusing on civil servants with the capacity to repay from their monthly remunerations. Eligibility is no longer levels of poverty. Given this paradigm shift and two contradicting developmental views the researcher hypothesized that the current microcredit has negative effects on the lives of the civil servants as they were overwhelmed by enticements in the form of loan top ups and instant loans. It is hoped that the findings in chapter 4 and follow up advocacy and awareness campaigns as suggested in [1]

chapter 5 will influence in a positive way the lives of those engaged in this prevailing consumption microcredit. 1.2

Background to the Problem

.

Microcredit, a small loan facility is a worldwide phenomenon with its recent

development credited to Yunus, a Bangladesh national, who practically enhanced the concept in the 1970s and popularized it in the 1980s as a developmental tool. Elahi and Rahman (2006). Sriram (2006) also believes Microcredit is a lubricant to development and falls under development theory. Waheed (2009) believes credit is one technique for financing development that can make its contribution to the complex problem of reducing poverty. Microcredit has inevitably a developmental component. Blondeau’s (2010) assertion that microcredit is fast developing as an international industry, with its own trade associations, dedicated finance, training, and other support organizations, research, and journals relates that there is substantial progress or success from microcredit institutions perspective. However this noble idea cannot be the wholesome and practical solution to poverty alleviation. There is little assessment highlighting the shortfalls and impact of microcredit from the beneficiaries’ perspective. The 195 Civil servants confirmed that they witnessed the decline of real wages as economic meltdown and inflationary environment eroded wage values. Many civil servants including the specific group under study confirmed that they had to find alternatives for them to survive. Microcredit in its various forms was the available option. Those who engaged in the borrowing spree found themselves with high interest rates and a deadly loan web which eroded their already meagre salaries resulting in their failure to service the loans. Some lost their property which was attached as collateral. It is against this background that this research wants to find out given unauthenticated reports that civil servants have become victims instead of being beneficiaries. The welfare of those entangled in the debt web was said to be worsening contrary to the microcredit expectations and this has a negative bearing on civil servants welfare and performance. Microcredit must be analysed to reveal its negative effects on participating civil servants.

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1.3.

Statement of the Problem The microcredit aims to service communities through providing financial rescue

packages. Individuals would access loans to be repaid through stop orders and other means. However, many microcredit institutions in Zimbabwe have digressed from the noble intentions and laid down operating rules. Many have turned into loan sharks and adopted predatory tendencies at the expense of borrowers in order to sustain their operations and maximize profits. Civil servants among others have fallen victim and have been driven into a vicious debt trap with some losing property and dignity. The proliferation of these money lenders with stop order codes and cash payments facilities has made civil servants borrowers more vulnerable with no visible government intervention. The formal banks have established MFIs directly competing with private money lenders over civil servants clients. The study looks at the microcredit business’ illegal practices and the extent to which this is affecting civil servants’ welfare and performance and highlight the plight of those caught in the loan web and in the process suggests alternative sources of financial services to reduce or end their misery.

1.4.

Research Objectives The literature review has broadened the knowledge on microcredit and aligned the

content to research subjects and coming up with clear objectives. The civil servants are usually differentiated in terms of experience or seniority and the study needs to identify the most affected civil servants by microcredit so that the impact will not be generalized to every civil servant but by experience in service. This will lead to analysis of practices and their impact in their rightful context. A look at solutions brings in the way forward critical in solving the effects on civil servants. The four objectives where the research questions evolved are: 1. To determine the most affected civil servants by microcredit. 2. To identify the illegal practices of microcredit institutions in Zimbabwe. 3. To establish the negative effects of microcredit lending to civil servants in the education sector 4. To suggest alternative financial solutions to microcredit.

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1.5.

Research Question Based on microcredit articulated as a developmental and non-developmental tool or

theory, studies and observations in the literature review enabled the researcher to adopt a broad research question for this study as “Has Microcredit have negative effects on Civil Servants in the Education Sector,” and this forms the basis of the hypothesis “Microcredit has an effect on Civil Servants welfare and performance.” The investigation is thus cantered on coming up the activities which reveal the negative practices. In addition to the broad research question the following questions were also explored: 1. Which group of civil servants was most affected by microcredit lending practices? 2. What are the illegal practices perpetuated by microcredit institutions. 3. What are the positive and negative effects of microcredit lending practices? 4. What are the alternative financial sources to microcredit?

1.6.

Justification for the Study Microcredit has been labelled and acknowledged by global networks as a

development tool contributing to self-sustenance and making significant contribution to the alleviation of global poverty and initiating an “upward virtuous spiral”( Ito,2010) This suits well with Zimbabwe Association of Microfinance Institution (ZAMFI), the umbrella body for Microfinance institutions’ vision which aims at transforming the quality of life of the poor and marginalized communities. Teachers have fallen into this poor category as their salaries are below the poverty datum line of 560 dollars per month. The study highlights prevailing practices on the ground which contradict the intended microcredit philosophy. It will prove that microcredit has in fact driven civil servants into poverty, negatively affecting their welfare and performance. Many have been locked in loan web cycles, impacting negatively on their daily work. The suffering, as exposed, will lead to establishment of alternative forms of financial assistance and make authorities aware and of the rampant suffering of the low income civil servants. It has been noted that literature on microfinance focus on its principles and do not single out government beneficiaries and

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assess its impact on that class of people. It is therefore critical to isolate particular groups and have a review as beneficiaries.

1.7.

Scope / Delimitations The case study is restricted to civil servants in the education sector in mashonaland

east province. However, to confirm civil servants claims, interviews were extended to microfinance owners, who are bound by the microfinance act and a mission statement advocating to promote best practices. The period to be covered is from 2015 to 2017. This is deliberately done to allow flow of recent information and identify prevailing challenges affecting civil servants in terms of welfare and performance as a result of microloans. The literature available mostly before 2014 seem to focus on structured borrowing as dictated by microcredit principles yet the reality of the prevailing microcredit activities no longer look at poverty alleviation but sustainability and profitability of lenders. 1.8.

Limitations of the Study. Limitations were numerous. These included access to respondents and documents in

the form of teacher establishments and pay sheets to verify loan beneficiaries. Microcredit is shrouded in secrecy and access to documents to come up with a possible list of microloans beneficiaries was a mammoth task which could not be efficiently accomplished. The element of legal ethical issues and official secrecy act had a bearing on accessing such information. Being a participant observer and government employee bias could have been inevitable being influenced by past experiences involving microcredit. However, the use of structured questionnaires and open ended questions made the analysis objective as my biased feelings were over powered by emerging data. The use of Snowball sampling had limitations associated with bias. The focal person chose to include friends and people with the same affiliation. It was observed that a solidarity pattern emerged leading to unbalanced versions or views. Probing and asking leading questions acted as a verification strategy for authenticity and consistency. The other limitation was the size of the sample which turned out to be small considering the overall population and number of schools. However this was necessitated by the secretive nature of microcredit and had the potential to increase chances of sampling error. [5]

A gap was also noted during analysis of data as the failure to co-opt spouses of microcredit beneficiaries to verify certain allegations of domestic violence emanating from microcredit burden. This to some extent inhibited the ability of the researcher to conduct a thorough analysis of the results. This is critical in future research on the subject. Literature available was mainly on South Asian and South American countries microcredit issues, taking microcredit as a recipe for alleviating poverty through business projects and entrepreneurship orientation. The available literature was not compatible with the observed evolution within microcredit industry, now commercialized to sustain and profiteer the owners of the MFIs who are claiming to be responding to economic meltdown and inflationary environment. In Africa and in particular Zimbabwe no identified literature focused on a special group earning a formal salary. The available literature was more on Small and Medium Enterprises (SMEs), growth of microfinance and the role of the state and partners like Non-Governmental Organisations (NGOs). There was a more generalized approach, making it difficult for the researcher to come up with comparison notes. The limitations though being mammoth and a possible hindrance, has helped the researcher seek other strategies as this was the opportunity and only way to come with more likely new information on a specific group, the Civil Servants and prove that Microcredit was to some extent not a developmental tool but a source of misery to borrowers.

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CHAPTER 2

2.0

Literature Review

2.1

Introduction Various literature in the form of textbooks, journals and fliers was reviewed with the

intention of finding the development of Microcredit, its practices and noted positive and negative effects on borrowers from a general perspective taking into consideration the environmental difference theory. Theory suggests that microfinance works differently in different regions where the population density, attitudes to debt, group cohesion, enterprise development, financial literacy and financial service provider all vary (Armendariz de Aghion and Morduch, 2005; Rooyen et al, 2012; Fischer and Gatak, 2011). This acted as the basis of comparison with my findings and created a platform to make solution informed decisions. Websites also added weight to existing literature and more information focused on Asian and South American countries which NGOs and individuals like Yunus, (2008) and Sriram (2006) who have passion for Microcredit activities viewed it as a tool to eliminate thriving poverty. Some authorities like Samer et al (2015), Duvendack et al (2011), and Bateman, (2014) though affiliated to the microcredit school of thought believed that microcredit had its limitations which undermined the livelihoods of the intended beneficiaries. The literature is characterised by two opposing camps or schools of thought. Review of literature establishes the basis for finding out. Generalising may not be appropriate given the cited theory version but it is common knowledge that many microfinance commercial institutions have entered the market in search of profits and are competing to lend to the poor and in the process they put the needs of the poor aside Sriram,(2010). The literature is to provide information on microcredit background, operations practices, divergent views and impact on communities and thus documentarily contributing to my study.

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2.3

A Brief Overview.

Elahi and Rahman (2006), explained the functional and conceptual differences between microcredit and microfinance. Microcredit according to Elahi and Rahman (2006), involves the provision of small loans to the poor and low income, while microfinance encompasses a range of financial and nonfinancial services that include savings, insurance, money transfers, training, and social engagements over and above credit revealing that the two are closely linked however microfinance has developed and expanded through other associated processes, but the two hinge on money lending business. In this research the two are synonymous and will be used interchangeably. Bateman (2014), Rooyen et al (2012) and Duvendack et al (2011) viewed microcredit services as expensive and believed it is there to accrue benefits to the providers of microcredit that is managers, owners, investors, advisors and not the poor recipients. Muhammad Yunus, Elisabeth Rhyne and Mankal Shankar Sriram regard it as a developmental tool. The growing debate over microcredit reveal that it is increasingly questioned, not only for its lack of proven poverty reduction and development outcomes but also also on ideological terms (Bateman, 2010, 2011; Rooyen et al, 2012). In Zimbabwe microfinance is provided by banks, Post Office Savings Bank (POSB), Microfinance Institutions (MFIs), Non-governmental organisations (NGOs), relatives and friends and private money lenders (Mago, 2015). Literature review will illuminate the microcredit practices and impact and put my study into perspective.

2.4 Microcredit as a Developmental Tool Microfinance encompassing microcredit is a global phenomenon and recognized development tool. It is hailed as the most innovative poverty alleviation tool, able to deal with poverty whilst at the same time generating sufficient extra income to cover operating cost (Toindepi, 2015). Microfinance has evolved from merely microcredit servicing the poor [8]

and low income brackets to a recognized money lending and financial services vehicle with banks joining the fertile market as evidenced by Banco Compartamos in Mexico and Grameen in Bangladash providing capital to the poor for projects. Bateman (2014). Issuing of credits can be traced to early proponents of credit, now viewed as classical credit. Spooner (1846), a great credit socialist theorist who subscribed to the notion that credit was developmental and believed individual labour was put into use and one was able to enjoy benefits through availability of capital, that if well invested was to transform one’s life. Spooner (1846) went further to justify getting a credit by saying, if a man has no capital of his own upon which to bestow his labour, it is necessary that he be allowed to obtain it on credit, so that each man may be his own employer. Spooner was advocating for credit as a source for employment creation. For it to be fair and beneficial to the borrower, Spooner (1846) discouraged immoral and absurd contracts for they are void from the beginning and likely to be illusive. Credit is thus developmental and is a transitional lubricant if well administered. The idea of it being developmental is also shared in modern microcredit philosophy by Sriram, (2016), Elahi and Rahman (2006) who assert that the loans will help them to develop their own business and pull them out of poverty traps or break out of the poverty vicious cycle and enter virtuous cycle. Blondeau (2010) believes they are able to increase their incomes and reinvest in their families or businesses. This is confirmed in a recent study in Bangladesh, cited by Blondeau (2010), which shows an increase in self employment among clients and improvement in child welfare and the children eating a better diet and registering a higher level of school attendance, an increase in self- confidence and self- esteem. Afrane (2002) in his study of two case studies namely Ghana and South Africa on the impact assessment of microfinance interventions, the outcomes have established that microfinance interventions have achieved significant improvements in terms of increased business income , improved access to life enhancing facilities and empowerment of people particularly women. Afrane (2002) said that evaluation is a management tool or mechanism aimed at measuring the effects of projects on the intended beneficiaries. The rationale is to ascertain whether the resources invested produce expected level of outputs and benefits as well as contributing to the mission of the organization that makes the investments (Afrane, 2002).This positive alignment of microcredit to address poverty is also supported by Westover (2015), when he acknowledged that aspects of microfinance, such as microcredit [9]

are designed to help lift individuals, families and communities out of poverty by providing small amounts of start-up capital for entrepreneurial projects which will then presumably help individuals to generate income, build wealth and exit poverty. In support, Miller and Martinez (2006), analysing benefits of microcredit also observed microfinance programs as an effective way to provide low cost financial services to the poor individuals and families. Khandker (2005) added that microcredit help in the development and growth of the local economy as individuals and families are able to move past subsistence living and increase disposable income levels, improving

health care, nutrition, education and helping to

empower women. Morduch (1998) had observed that due to microcredit, children are being sent to school and enrolled longer. This may imply that microcredit promoted access and retention in schools. On microcredit as a lubricant to economic growth the Reserve Bank of Zimbabwe (RBZ) in its 2004 and 2005 monetary policies emphasized microcredit as drivers of employment creation through small financial investments in Small to Medium Enterprises (SMEs). Microcredit had economic value to the nation and the RBZ put in place the Microcredit Act to regulate microcredit operations in Zimbabwe. Fliers from microfinance institutions advertised for school fees, targeting government workers. Stanffenberg (2006) in his online presentation titled “Microfinance101 : Poverty Cure Episode 2 .” believes microcredit inculcates a sense of responsibility , concept of saving , micro insurance and the process of addressing savings, insurance, characterized by training, one would be collectively addressing poverty issues. Sense of responsibility is premised on financial discipline. Financial discipline include how to spend and use money to enable earning a living with dignity (Wagner, 2015). RBZ is highly regarded by ZAMFIs as it monitors the extending of small loans to financially incapacitated individuals and community groups who lack access to the mainstream finances. This improves financial security and maintains or improves the welfare of microcredit beneficiaries through accessing health, education and increase their incomes.

2.5

Negative Practices Microcredit has overwhelming accolades as a developmental tool but its processes are

not visible with regards to beneficiaries. Robinson (2001) cited by Mago (2013) observed that most of the demand for microfinance came from those operating illegally and thus illuminating their practices was very difficult, since these were not documented. Their [10]

operations were shrouded in secrecy. Another trend is that Zimbabwe microfinance is more visible when one talks about SMEs which are project oriented. It is silent on individual government employees bound by statutory instrument 1 of 2000. Civil servants cannot establish micro and small enterprises and engage in manufacturing, commerce and service activities without government clearance. It is difficult to generate self- employment and jobs for the country as postulated by Barnes et al. (2001) yet microfinance is widely acknowledged as a viable strategy for promoting informal sector business activities. (ZAMFI (2005). Mago (2013) suggested for the government to create a supportive legal environment as MFIs form part of the financial sector and governed by Money-Lenders Act. Banks have joined the private money lenders viewed by Armendariz de Aghion and Morduch (2005) as exploitative monopolists who systematically squeeze the poor. This contradicts Mago’s (2013) assertion that traditional banks are not willing to take risk because they rate the sector “credit unworthy”. Civil servants who had been traditionally linked to banking services have increased the demand for microfinance resources and banks have been distributing fliers enticing civil servants. Mago (2013) who cited Robinson (2001) has failed to register the evolution in the microfinance sector from borrower’s perspective, but acknowledged that the sector was subdued by hyperinflation between 2000 and 2009, foreign currency shortages and decline in real wages. They closely associate microcredit with the rural poor and victims of Zimbabwe’s Economic Structural Adjustment Programme (ESAP) willing to join the informal sector as opportunities in the dwindling formal sector were scarce and regarded them as unbankable, yet the current trend both for formal banks, regulated and unregulated MFIs have moved away from project focus to individual consumption as long as the recipients have a steady source of income to repay. Civil servants are on target as revealed by banks and MFIs fliers and not the poor. MFIs are responding to prevailing economic environment and not the welfare of borrowers. This approach revealed high incidences of poverty, rendering microcredit a non- developmental tool from this perspective ( Copstake and Westover, 2015). The assessment is not disputed by other impact assessment evaluators. (Westover, 2015; Duvendack et al, 2011) analysing the ineffectiveness of microfinance articulated that the microfinance philosophy of alleviating poverty is difficult to assess given that poverty was a worldwide epidemic and has different meaning to different people. Various variables come into play. Microcredit is not the only contributing factor to poor welfare, but a myriad of factors. The loan levels are also a cause of concern and difficult to use as a remedy for [11]

poverty alleviation. Asian Development Bank (ADB) (2007) evaluation on the outreach of microfinance projects in Philippines focusing on rural microfinance project of 2002, the average loan size of sample borrowers was US $106 from regulated institutions and banks. Given this scenario, one would reflect on the size and magnitude of the project which would yield maximum benefits to cover living costs in terms of education, food, assets and other costs which evolve in trying to service the loans. Thus, ADB (2007) concluded that targeting microfinance on the poor may not be the most appropriate way to help them escape poverty. The loan size and projects selected by the poor to finance with microcredit loans did not generate sufficient profit to increase household income to sustain dignified livelihoods. NGO leaders and government policymakers must exercise caution and restraint in applying the microfinance approach universally as a means of alleviating poverty. (Westover, 2008). Some studies have shown that microfinance programs benefit the moderately poor more than the destitute and thus impact can vary by income group ( Copstake 2001, Dugger, 2004).They gave examples of existing vicious cycle of debt, microcredit dependency, domestic violence, low repayment rates in comparison with traditional financial institutions. Other negative findings from studies are the use of harsh and coercive methods to push for repayment and excessive interest rates (Business week, 2005; The Financial Express, 2005).The Zimbabwe Association of Microfinance Institutions (ZAMFI),(2017) attributed this behaviour to non-members as they were not regulated by government statutes through the RBZ monitoring process. 2.6

Interest Rates In Zimbabwe Microfinance was and is well regulated by the RBZ under the armpit of

the Ministry of Finance. Its noble purpose include putting entry and exit barriers in their bid to protect borrowers from exorbitant interest rates (RBZ, 2005). Evidence of high rate interest make people poor, undermining the desired steady source of income (Bateman, 2014). The average rate of interest and fee rate globally is estimated at 37 per cent with rates reaching as high as 70 per cent in some markets. Rosenberg et al, (2013). These high rates as highlighted by Raiffeisan (1998) is a challenge and translates to high costs and limit microcredit effectiveness as a poverty fighting tool. In this case borrowers who do not manage to earn a rate of return at least equal to the interest rate are likely to end up poorer as a result of accepting loans. Mexico’s largest microcredit bank, Banco Compartamos charged 195%interest rates to its poor female clients ( Roodman, 2011). Roodman (2011) also cited

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Capitek bank in South Africa with usurious interest rates over the poor mining communities which gave birth to a rich management team. The 195% figure is usurious in nature and considerably disadvantaging the poor in their bid to escape from poverty. Banco Comprtamos then used the very healthy surplus it generated from the poor to pay out very large dividends to its worldwide wealthy shareholders (Bateman, 2014). Bateman (2014) went further to say evaluation experts who undertook assessment of Banco Compartamos found very limited evidence of any positive impact arising from lending activities to the poor. New York article cited by Sriram (2010) painted Microfinance as an industry overrun by big banks that charge eye-popping interest rates. However, a debate on the effects of low interest rates on microcredit has proved to be retrogressive. Adams et al, (1984) cited by Mago (2013) said ironically cheap credit has been criticized for contributing towards the underdevelopment of rural areas. In their book “Undermining Rural Development with Cheap Credit”, they pointed out that low interest rates undermine microfinance and rural development. Interest rates charged should promote sustainability of MFIs. Amerndariz de Aghion and Morduch (2005). The thrust on high interest rates reveal exploitation of borrowers and poverty is highly inevitable. MFIs are worried of their welfare and sustenance thus they had to disregard the borrowers’ welfare, revealing a skewed relationship. There is a noted rampant mushrooming of microcredit institutions which demand collateral in the form of household goods and effect stop order deductions, a practice violating ethical operations of the development tool (Toindepi, 2015). These institutions have transformed into microcredit loan sharks and instead of improving the lives of borrowers they have made the lives of many people, in particular, civil servants miserable, impacting negatively in terms of their welfare and performance yet microfinance as a key financial tool, is supposed to offer the poor an opportunity to escape from their situation. In Zimbabwe, the Central bank, RBZ guided by the ministry of finance, instituted the Microfinance Act (2013), to regulate operational activities of Microfinance houses and a Zimbabwe Association of Microfinance Institutions was established as far back as 1999 (Microfinance Annual Performance Report, 2017).

The literature reviewed so far,

microfinance is to some extent developmental but critics say that microcredit has not increased incomes, but has driven the poor into a debt trap, in some cases leading to suicide (Westover, 2011). Microcredit recipients have been using their hard accumulated property

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like fridges, television sets, beds and sofas as collateral and due to credit overburden they failed to repay on time leading to the loss of collateral property (Toindepi, 2015). This reveals the extent to which these microfinances impoverish the borrowers who had no choice but to move to the next microcredit house, thus expanding their credit borrowing misery. The first randomized evaluation of microcredit conducted by Duflo and Barnerjee (2013) showed that there was no effect on household expenditure, gender equity, education, health, but the number of new businesses increased by one third compared to a control group.

2.7

Microcredit as a Variable

Microcredit as a new financial systems approach cannot be a single alternative escape route from poverty. Blondeau (2010) concurs with the statement that microfinance does remain an essential financial tool but believes that one cannot reasonably expect such an instrument to resolve the complex, multidimensional problems of poverty. It needs complementarity with other developmental tools. Various issues come into play. In Zimbabwe 80 per cent of the population is now poor compared with 25 per cent in 1990/91 (Mago, 2013). The probability of timely loan repayment is compromised. The rise of poverty is thus fuelled by other factors. Other factors besides microfinance has the potential to alleviate poverty. (Sachs, 2008) Dependency on a single variable as a key single economic activity may pose problems. The presence of hyperinflation had serious effect of eroding the value of loan proceeds resulting in the welfare of loan beneficiaries undermined.

2.8

Conceptual Framework

Low salaries

Poor planning

Ind. variable

Outcomes

Microcredit (Wrong use ,over borrowing, high interests,)

Poor Welfare

[14]

Poor performance

Absence of resources

Economic meltdown

The assumption was that Microcredit (Independent variable) with its associated variables (wrong use, over borrowing, high interests) have direct link to poor welfare and poor performance. However, other intervening variables (low salaries, poor planning, economic meltdown and absence of resources has a bearing and potential to lead to poor welfare and performance. This assumption has been proved wrong as low salaries assumed the role of independent variable. (See table Fig 11 , page 35). 2.9

Microcredit: MFIs as a Commercial Entity The commercialization of microcredit in 1984 came with a myriad of challenges and

questions. Global studies on whether microcredit was developmental or not have been conducted and a risk of certain clients becoming heavily debated were common (Bateman, 2010). Noted beneficiaries were the government and loan providers who became sustainable through recycling resources supported by legal and regulatory frameworks (Sriram, 2010). Microfinance houses entered the market to make profit and completion was inevitable. They put the needs of the poor aside and focused on chasing targets and numbers. (Bateman, 2010). Borrowers did find it really difficult. The debt attracted interest and took preference in terms of repayment. The level of profiteering and greed that has emerged in the industry as it was extensively commercialised stunned even hardline microcredit supporters. ZAMFI (2017) acknowledged the issue of liquidity crisis as a negative effect on microfinance and a reason why organisations had to realign to absorb pressures and stay in business. Cash shortages directly affected the repayment of loans. However Microfinance institutions have put strategies to mitigate this liquidity risk by insisting SSB stop order, Point of Sale (POS) machines, RTGs, and mobile phones platforms (ZAMFI, 2017). This risk mitigation strategy favoured MFIs and did not pay attention to consumer protection principles and corporate social responsibility. ZAMFI (2017) in its Quarterly Performance of the Microfinance Sector 31 March 2017, revealed that the industry was doing well in terms of outreach and profitability while facing a key challenge with respect to portfolio quality. Yunus and Weber (2010) believed an increase in the commercialisation of the industry has met with suspicion and concerns around the ethics of making money from the poor. The [15]

commercialisation crisis which hit the industry in India, Bosnia, Morocco, Pakistan, Nicaragua and Nigeria where thousands were over indebted had serious implications for people’s livelihoods (Rooyen, 2012).The commercialisation of microcredit removed its social and economic protective tag over the poor and disadvantaged. It was now an exploiting tool to enrich the already rich. A well-meaning intervention has not worked out as was intended as the poor recipients remain as much in poverty as ever (Bateman, 2010). Providers of microcredit are instead accruing benefits and profits. It is now a commercial entity.

2.10

Summary This chapter presented a broad overview of microcredit as a developmental tool, its

negative practices and showed the evolutionary nature of microcredit. Microcredit enabled communities to access capital to venture into business and pay educational costs. It is the right recipe for poverty alleviation. However some evaluation experts who undertook microcredit assessments of banks like Banco Compartamos in Mexico and Capitek in South Africa found very limited evidence of any positive impact arising from lending activities. Notable was the commercialisation of the industry and systematic profiteering by microloans lenders and creation of wealth by shareholders through dividends. The dominant narrative describing microcredit today is the accruing of benefits by providers of microcredit. Interest rates were as high as 195% in some instances with no intervening variables like laws and regulations enforced as a protection measure to the poor. Microcredit thrives when laws and regulations create significant entrances to the sustainability of microfinance providers especially by removing interest rate caps. Reviewed literature focus more on MFIs performance and challenges and not on the beneficiaries welfare and sustainability issues. Many loan beneficiaries were traped into the vicious loan web due to loan top ups. The literature reviewed, proved that microcredit was evolving and the present features have departed from the original philosophy as propounded by microcredit gurus like Muhammad Yunus. Microcredit now disregards some key considerations of one’s status as an eligibility criteria. Initially microcredit focused on the poor and those not formally employed but transformed to carter for the employed and salaried like civil servants. Consideration is one’s pay slip to guarantee monthly deductions and MFIs publicly announce their present products [16]

available to civil servants like loan top ups and instant loans. MFIs have been highly commercialised and to some extend highly exploitative in nature.

CHAPTER 3

3.1

Research Methodology The philosophical theories underpinning the researcher’s choice of methods was

largely influenced by quantitative approach with qualitative and participatory methods used to verify and buttress structured questionnaires through group focus interviews to elicit critical human feelings information and diverse views on illicit borrowing. Credit programs are designed to promote positive transformation in the economic, social, spiritual, and political lives of beneficiaries and their communities and this demands flexible and eclectic research approach that combine relevant aspects of quality, quantity and participatory methods. Thus triangulation in this research was inevitable. The use of triangulation or multiple data collection was mainly to increase the desired credibility of my findings. In terms of data collection, main survey instruments were used. These included questionnaires, interviews and observation. The questionnaire interviews were for teachers, Administration workers and School heads. This approach falls under quantitative data collection methods that fit diverse experiences and produce results that are easy to summarize, compare and generalize and focused on a sample of civil servants randomly selected. The questionnaires were distributed by School heads and District Schools Inspectors (DSIs) and collection was to be done through emailing. However delays were found during collection as almost ninety percent were not email compliant. Three teachers and one administration officer managed to email their questionnaire responses. [17]

Under qualitative three basic data gathering techniques were employed and these included interviews, participant observation and document content analysis. This was visible on focus group discussions with teachers, administration staff and Microfinance Institutions (MFIs) directors and observations from critical documents like pay sheets at the provincial offices which reflected school teacher population and stop order deductions. The sample for Focus group discussions was a snowballing process product as the microcredit recipients were not openly known. This has to be done through associates or friends, School heads and District Schools Inspectors (DSIs). The Civil Servants questionnaires collected both quantitative and qualitative data from individual civil servants who fell within the sample. Section A of the questionnaire had predetermined response categories. Section B has open ended questions to assess changes in people’s perceptions of their wellbeing in terms of microcredit. This section was also meant to expand and clarify or corroborate Section a quantitative evaluation findings for objective assessments. Some visits were made to sampled schools to confirm and collect questionnaires and further probing of issues deemed not clear. Some respondents did not bother to respond to all questions. Focus group approach and school heads interviews assembled more detailed qualitative information than initially anticipated. Focus group discussions proved to be a free platform which encouraged participants to open up. Heads by virtue of being custodians or accounting officers had individual member information. For qualitative data collection, a semi structured interview guide (appendix) was designed and the interviews were semi structured in nature. Some key questions were posed directly to the subjects, whereas some were formulated in response to divergent issues raised during the discussion. Focus group sessions were more interactive and respondents were interviewed repeatedly or several times to follow up on a particular microcredit issue and check the reliability of the data. The questionnaires were collected and physically analysed one by one by the researcher recording and tallying corresponding responses coming up with excel initiated graphs and charts. The focus group discussion and oral interviews were audio recorded and later replayed during data response and field notes analysis. It should be noted that use of cameras or photographing was not entertained by the participants. They claimed that microcredit was their secret and giving information was voluntary. So publicity in whatever way or form was not entertained.

[18]

3.2

Research Design A case study was used. Zimbabwe has ten provinces with vibrant microfinance

institutions of various categories offering diverse services to various people. Mashonaland East is one of the ten administrative provinces. My focus was restricted to Mashonaland East Province targeting Marondera district because of its urban set up , Wedza with a mixture of rural set up and schools in the growth point, and Chikomba again reflecting urban and rural environment. Focus group approach is restricted to Mudzi, Mutoko, and Seke because the researcher had easy access to teachers at various forums as a facilitator of the new curriculum in the three districts.

3.3

Population The population constitute of 1650 civil servants in the education sector in

Mashonaland East. The target group were secondary, primary teachers, district and provincial administration staff in Mashonaland East Province focusing on five identified districts namely Mudzi, Mutoko, Marondera, Seke, Chikomba and Wedza. The universe or population was derived from district returns which provided number of teachers in each district and other non-teaching staff deployed at district and provincial offices. The challenge encountered was that it did not show who was on credit scheme, making the researcher rely on District schools inspectors and not microcredit beneficiaries list. 3.4

Sample Since the study is underpinned by a mixture of largely quantitative and limited

buttressing qualitative approaches, the Sample Size Calculator by Rao soft sample analysis was used to come with a broad sample of 350 from the 1650 total population The process involved identification of the sample frame, determination of appropriate sample sizes, and distribution of the sample size to appropriate groups to ensure proper representatives of the client population. The basic criterion in determining the sample frame was guided by a specified minimum period necessary for clients to have experienced some form of microcredit impact in their lives and six months was the minimum. However, microloan is a secretive preserve and it faced challenges of finding volunteers who come in the open to divulge their experiences. This may have resulted in the distortion of the expected sample structure. Thus after identifying the population the actual sample could not be easily reached [19]

as no list of microcredit beneficiaries was available. The researcher realized that at every school 30 percent plus were microcredit beneficiaries and this has been established through perusal of the monthly pay sheets at the provincial level. It was noted that many were reserved and not keen to individually partake in the research exercise for ethical reasons. The researcher had to employ stratified purposeful sampling which Patton (2001) describes this as samples within samples and suggests that purposeful samples can be stratified or nested by selecting particular units that vary according to a key dimension. This can be equated to disproportionate stratification under stratified sampling from the population, heads of schools systematic sampling was done as this group was above other civil servants and had access to microcredit beneficiaries and personal information. Teachers and non-teaching staff were grouped according to districts and random sampling was employed to come up with a sample. For group focus group interviews, exponential non-descriptive snowball sampling was employed to counter non voluntarism and be able to recruit microcredit hidden populations. The Microcredit Institutions (MFIs) directors and representatives were only ten who responded after being identified and they were all involved in the research data collecting machinery with no specific sampling involved. Thus the samples were representative and reflect sampling variation which allow possible drawing of inferences about a population.

[20]

CHAPTER 4

4.0

DATA PRESENTATION, ANALYSIS AND INTERPRETATION

4.1

Introduction The chapter is a culmination of all analysed data collecting instruments used in the

research. The questionnaires for civil servants, heads of schools, Microfinance Institutions directors and Focus group interviews and discussions to collaborate civil servants responses were analysed as a single entity. Informal interviews and observations also came into play to authenticate issues raised and establish different opinions. The questionnaire instruments were distributed by District Schools Inspectors (DSI), Schools Inspectors (SI) and some School heads on voluntary basis. The distributed instruments did not realize a 100 percent return. 75 percent were completed and returned via intermediaries and 10 percent were incomplete. 15 percent were not returned.

Summary of returns Completed questionnaires Incomplete questionnaires Not returned questionnaires

75% 10% 15%

[21]

The data analysis’s thrust was to focus on three objectives which will in turn become the basis of the fourth objective highlighting on recommendations and in the process proving the hypothesis correct or incorrect. Use of excel analysis to come up with representative tables was the main data analysis tool. The key overall observation in this research is that microcredit information has largely digressed from the traditional microcredit processes as initially advocated by gurus in the microcredit field like Lysander Spooner, Raiffeisen and Muhammad Yunus. It is a new version of microcredit attached with a commercial approach, where the MFIs focus on their sustainability and profitability largely ignoring the borrower’s welfare. This has been evident and reflected in the bio data, group discussions, and all questionnaires. This is collaborated by MFIs and fliers which has been analysed. 4.2

Data Analyses The data analysis as alluded in the introduction, was directed to prove the hypothesis

and answer to associated research questions or objectives. In the process the initial conceptual framework was put to test and identified other variables with a potential to have an effect on civil servants besides microcredit. As highlighted before, the data was largely derived from an analysis of civil servants, heads, MFIs director’s questionnaires and responses from Focus Group interviews, discussions and opinions. Use of excel analysis was also employed to come up with graphic presentations. Fig 2. Hypothesis and key Research Objectives

[22]

Fig 1 illuminates the research objectives 1, 2 and 3 which leads to hypothesis conclusion. Objective 4 is largely to find solutions to findings observed in attempting to achieve objectives 1, 2 and 3.

4.3

Most Affected Civil Servants Part of the bio data is to answer to the research question or objective focusing on

determining the most affected Civil Servants by microcredit lending activities. The bio data from the Civil Servants questionnaires revealed a skewed level of borrowers with active borrowers falling between 1-5 years and 16-20 years on all civil servants. It turned out that this experience range is composed of relatively new employees in the field and experienced personnel. They had demands largely emanating from new families, need to acquire property and settle down. The 21-30 years mostly borrowed for educational fees and from focus group discussions this 21-30 years’ experience group has off-springs in [23]

high schools and tertiary colleges which required large sums of money as fees. It was noted that the 31 years plus borrowed only during critical times, making it difficult to assess the effect of microcredit on them as many have acquired basic property that relying on microloans was minimal. Many had stabilized and experienced financial discipline. An excel data analysis of bunched experiences produced the line graph below. Fig 3 Most Affected Civil Servants

Percentage 30%

25%

20%

15%

10%

5%

0% 1-5yrs

6-10yrs

11-15yrs

16-20yrs

21-30yrs

31plus yrs

The line graph shows the increase of borrowers 1-5 years from 15% to 25% when they reach 6-10 years’ experience. It stabilizes and then declines as they reach 31 plus experience.

The bio data also showed gender skewedness. Men in all the categories of experience borrow more than women. The skewedness is also evident on the overall women participation as respondents. Women were more reserved even in questionnaire filling as they wrote short answers. However this trend was not evident in Focus group discussions. Women were more [24]

than men and more vocal in highlighting the illegal practices perpetuated by MFIs. Reasons cited by both males and females on why men borrow more than women was that men have more responsibilities in our Zimbabwean set up and patriarchal nature of the society make men dominant. Some men said that women are equally entangled in the loan web trap but are afraid to come in the open as some of these loans are privately obtained and totally a personal secret. Some civil servants were reserved over these borrowing issues.

4.4

Respondents The main questionnaire for civil servants had 120 males and 75 females making a

total of 195. Heads who responded were 17 males and 3 females. Focus group had 65 males and 50 females’ total participants and microfinance institutions had 9 males and nil female participants. However focus group participants were not much controlled but were used to solicit critical opinions, views and mainly used to collaborate views from the civil servants questionnaires.

Focus group participants did not want their credit status divulged as

individuals but singled out as a group, but at the same time highlighting their experiences and feelings on the discussion platforms. Civil Servants, Focus Group and 12 heads acknowledged that, more than once, they have borrowed money from microfinance institutions. It was also noted that they have borrowed more than once from various Microfinance institutions depending on accessibility and the available cash resources. An excel analysis has bar graph showing respondents.

Summary of respondents respondents Civil servants School Heads Focus Group Micro-finance institutions

M 120 17 65 9

F 75 3 50 0

Fig 4: Respondents

[25]

Total 195 20 115 9

35%

25% 22%

9% 5% 0% 1% female

3%

male

The graph illustrates the respondents by sex of participants in the study. Focus group discussions had more females than men (35% vs22%). School heads had 1% female head teachers and 5% male school heads (1% versus 5%). Civil servants group had females25% males versus 9% and Microcredit owners 0% women and 3% male of the total respondents.

4.5

Borrowing Levels The range of amount borrowed clustered around $501 – 100 and $1001 – 2000. From

the group discussion $2000 was a lot of money to be borrowed once but was largely accumulated through top ups of $100 to $300 and the respondents were in agreement that getting top ups meant continuous borrowing as the cash was readily available. Respondents will show the extent of how many civil servants were affected from the sample. A pie chart was produced through excel analysis showing borrowing levels.

Fig 5. Borrowing Levels

[26]

7%

26% 16%

$50-$100 $101-$500 $501-$1000 $1001-$2000 $2000-PLUS

23% 28%

The pie chart shows that more civil servants borrowed between $1000 and $2000 but the figures were not authentic as we relied more on the word of mouth and what the respondents wanted to say. 4.6.0

Illegal Practices.

4.6.1

Repayment Mechanisms Repayment mechanisms as alluded by all respondents was through stop order with

Salary Service Bureau and cash payments. Loan top ups were largely little and many opted to pay cash. Stop order is mostly for large borrowed sums. The MFIs directors concurred with the payment mechanism. The nine MFI directors concurred in that some of these borrowers do not want to be known by their spouses that they are borrowing and it is more risk to use stop order as this is reflected on the pay slip and is likely to be a fertile cause for domestic misunderstanding and eventually domestic violence. All civil servants highlighted the current abuse perpetrated by SSB who continue to deduct even the loan has been fully paid and it would be difficult to recover the over deducted money. This trend has also been highlighted in the literature review. The over deductions have serious repercussions on the welfare of the borrower. The member is sucked back onto the loan wagon or debt trap.

[27]

Continuous deductions is illegal and pause economic challenges with long term repercussions on the borrower. 4.6.2

Credit uses and effects Other incidents highlighted by respondents from the focus group and corroborated by

MFIs was that some men and women borrowed money for “private” use. They cited money to maintain children outside marriage, spouse parents, and entertainment as some pressing expenditure bills for civil servants. These private loans force many civil servants to look for top up resulting in them being unconsciously addictive and caught up in the debt web. Three women made a revelation that they accessed loans to manage the welfare of their old parents and wanted loans without their husbands’ knowledge as they claim their husbands would not approve such huge expenditure or budgets outside their salary boundaries. It was to be privately done at all costs and thus a stop order deduction was not confidential and they opted for cash repayments. In this advent of cash crisis and general economic melt-down, they borrowed from other MFIs to pay outstanding balances borrowed. The implication of these private loans as observed from focus group discussions is a time bomb to family stability as any exposure of private loans would accelerate family domestic violence. They also make some civil servants rely on loans as a solution to their ever growing money needs. Given this scenario one would conclude that such loans has a negative effect on family stability and is a lubricant for domestic based violence. 4.6.3

Interest Rates Respondents with the exception of MFIs directors had different versions of the

interest rates ranging between 10 and 50 percent. The inconsistences reveal the usurious nature of the interest rates. 52 percent were not sure as they claim that interest rates were always upwardly changing responding to economic inflationary environment. Their basic need was the loan for immediate relief than analysis of the interest rates. 31 percent were aware of the interest rates’ usurious nature but had no option. They had to borrow as the process was less vigorous with little questions asked. 17 percent did not know the interests rates as top up has no platform for interest rates discussions and this group did not complete the interest rate section but acknowledged that the interest rate was not fair as it is per month on money borrowed and not per annum as advocated by RBZ. Discussion of interest rates at a focus group forum confirmed the confusion over interest rates. The group members said [28]

that they were not concerned about the interest rate but the immediate cash. They had no option even if the interest rates were prohibitive. Immediate relief was a priority. To quote “uku kuuraiwa tichiona chaiko asi hapana zvekuzviita nekuti hapana anouya kuzokununura tongofa takadaro”.(We are being openly deprived but there is nothing we can do since no one will come to our rescue). This expresses deep resentment over microloans. The whole loan acquisition process was thus fraudulent as MFIs took advantage of the desperation of the borrowers. This was not procedural but merely exploitative in nature. The MFIs benefitted at the expense of some civil servants making exorbitant profits in the process.

Fig 6. Interest Rates

[29]

17%

52%

31%

The pie chart shows three versions over the knowledge of prevailing loan interest rates. Some genuinely were not aware as they were always topping up and had no trace of interest calculations

The different versions shows the uncertainty and possible exploitation of

borrowers.

4.6.4

Collateral Security

The nine MFIs directors said borrowed money below $300 do not require collateral but a current pay slip, I.D and proof of residence and employment. These were enough for one to access a loan. Collateral was for those perhaps accessing loans of more than $300.00 and basic collateral was household property like flat TVs, sofas, vehicles and residential stands. This approach was mostly availed to civil servants with clean pay slips and background information of the borrower was highly sought to reduce risk lending. Focus group interviews confirmed that even if no collateral was agreed these MFIs will come and collect whatever is available if one fails to timely repay loans and they cited their colleagues who had their property confiscated due to failure to pay. Two school heads witnessed confiscation of [30]

property of their teachers and some 9 teachers openly confirmed having their property taken to offset unpaid loans but the others were not free to divulge such information as it has dignity implications. Questionnaires analysed were inconsistent with 10 percent leaving designed spaces blank. Collateral security had an effect on borrowers as some lost their hard won property thus impoverishing them. The idea of placing your property as collateral brings in insecurity on the part of the borrower and this has a negative bearing on the welfare performance of the borrower.

Fig 7

Collateral Security Items

The pie chart shows part of the items placed as collateral security when one is borrowing more than 300 dollars. The larger percent of 55 % is household property and this shows that Civil servants were more likely to lose property. Collateral or taking property after one failed to pay was likely to bring in insecurity and stress. 4.6.5

Loan Acquisition Process The 9 MFIs directors interviewed and 195 civil servants questionnaires confirmed that

accessing loans was a matter of hours unless if the member failed to meet laid down criteria. If one is new, a day or two would suffice to access a loan. The borrower had to visit MFIs offices for a quick processing. MFIs and civil servants highlighted a paradigm shift in that some MFIs are now moving around schools and government offices enticing civil servants [31]

and marketing their products even during working hours.

Some focus group members

without mentioning their stations and MFIs responsible said that some MFIs had gone as far as privately employing civil servants to be their agents on commission. These civil servants will negotiate and do all the paper work and simply take them to the MFIs for loan disbursement. Many individual civil servants were evasive but acknowledged that sometimes in order to save time and quickly access the loan, their workmates or colleagues were easy intermediaries. The 20 heads acknowledged this new trend of MFIs dispatching their agents to schools. The agents visit schools to find new clients and encourage those about to clear their arrears to get loan top ups. This new trend ensures that civil servants have easy access to loans but it is illegal moving around schools as it is likely to digress civil servants from their core business. The whole process of loan acquisition had repercussions on civil servants commitment. Focus group respondents openly said absenteeism was inevitable and this was confirmed by heads of schools and the majority of civil servants questionnaire respondents. Thirty percent of the civil servants confirmed that at one time they absented themselves to process loans or negotiate repayment mechanisms. Twenty five percent did not respond to the question. Forty five percent confirmed that they did not absent themselves to solve microloan issues. School heads also confirmed that some teachers openly requested permission to absent themselves to solve loan issues. Some use illness and need to attend to a hospital for medication but turn out that they visited these Microfinance houses. All this prove that Microcredit has an effect on teacher performance and welfare. All respondents both interviews and questionnaire said that loan borrowing is addictive and once you borrow for the first time you are likely to be entangled for life. Focus group respondents at one gathering said Just like drugs one would require therapy or rehabilitation for loan addiction. 4.6.6

Loan Purpose and Top ups. All questionnaires or verbal interviews cited the purpose of the loans and the

categories are illustrated in Fig 6. School fees has the highest percentage followed by food then social problems and lastly purchasing property. They all cited that borrowed money was for immediate consumption with no prospects of returns through investments. This lack of entrepreneurship component has rendered civil servants to continue borrowing to keep them afloat. All the civil servants blamed low salaries which could not sustain them and thus relying on microcredit. Focus group participants were emotional at all venues and cited low

[32]

salaries below the poverty datum line as a lubricant to their misery. All 195 questionnaire respondents agreed that insufficient salaries were behind top ups making borrowing a norm. Nine heads of schools concurred with civil servants respondents but cited carelessness by some of their teachers who fail to leave within their means. They don’t think beyond their salaries and they rely on borrowing to maintain the artificial life styles they emulate. The use of excel interpretation had the following bar graph.

Fig 8.

Loan Purpose: Respondents’ Views.

40% 35%

20%

5%

Fig 6 Shows the respondents’ views on loan purposes. School fees top the list with 40%., social problems 35%,household 20% and the least purchase property with 5%. 4.6.7

Borrowing: An Addictive Trap. Focus group concurred with borrowing becoming a trend and this is the line of

thought of civil servants. However, school heads believe borrowing by some civil servants was merely reckless on the part of the borrower and can be avoided. MFIs directors believe financial indiscipline make many borrowers depend on loans to make ends meet. Availability [33]

of ready loan top ups is an attracting bait which many are easily caught in the debt web. Overall, one cannot dispute that microloans are addictive. The loans in their nature are not productive and have no capacity to empower borrowers through investments and entrepreneurship skills but help in increasing emotional stress. Focus Group participants, heads, MFIs and civil servants respondents concurred on the issue of having been emotionally affected by loan burden in one way of the other. By its nature they believe loans are a burden. A summary related to emotional distress is highlighted below:

Who distributed questionnaires and collected them were senior government employees like District Schools Inspectors, Schools Inspectors and Heads making it difficult for civil servants divulge issues of absenteeism and failure to work. However, my own survey and observation especially on focus group discussions absenteeism is evident. Heads also mentioned some teachers asking some respondents were not free to express the truth especially on absenteeism due to stress as they become reserved or evasive. Agents for permission to resolve microloan issues. MFIs directors also confirmed that their business premises are visited during working days to either apply for a loan, make payments or resolve matters arising from borrowed loans. Resolving loan issues during working hours reveal absenteeism and stress related life style. 50% of the interviewed heads cited issues of violence between spouses ending up at police stations. The two school heads went further to cite teachers at their particular stations that earn $18.00 and $56.00 net after loan and other deductions. This had ripple effects and the couples have a record of domestic violence. Given this scenario element of dignity is driven away and the job motivation and concentration is highly compromised. Abuse of salary deduction by SSB on behalf of MFIs has emotional impact on borrowers’

welfare. Continuous deductions encourage absenteeism as civil servants visit

responsible offices to get assistance and address over deductions anomalies. 40% of all civil servants respondents and focus group interviewees believe these are periods of embarrassment. Dignity is ruled out.

[34]

4.7

The emerging Conceptual Framework. The civil servants respondents cited all the four variables as shown in the table fig 9

below: Fig 9. VARIABLE

PERCENTAGE

Economic meltdown Low salaries Microloans Personal mismanagement

22 40 35 3

40 % of the respondents believed their challenge was not microcredit but the low salaries which inevitably forced them to enter into the loan web. 22% associated their predicament with economic meltdown which eroded their savings and their incomes worthless. 35 % blamed microloans citing the loan top ups and instant loans as baits ending up in loan webs. 3 % turned out to be the 31 years plus experience who blamed the civil servants for failing to have self-management and financial discipline. Thus the 40 % low salaries assumed the independent variable status resulting in a new conceptual framework from the originally assumed.

Fig 10.

Original Conceptual Framework

Low salaries

Poor planning

Ind. variable

Outcomes

Microcredit (Wrong use ,over borrowing, high interests,)

Absence of resources

Poor Welfare

Economic meltdown

[35]

Poor performance

The original framework assumed that microcredit as an independent variable directly leads to poor welfare and poor performance at the same time acknowledging other intervening variables. However, through interactions with questionnaires and Focus group participants microcredit, though leading to poor welfare and performance is highly driven by low salaries a variable initially viewed as an intervening variable leading to a new conceptual framework with low salaries as the independent variable and microcredit as the intervening variable. Fig. 11.

Emerged New Conceptual Framework

Microcredit (Wrong use ,over borrowing, high interests,)

Poor planning

Ind. variable

Outcomes Poor Performance

Low salaries

Absence of Resources

Poor Welfare

Economic Meltdown

The emerging conceptual framework shows low salaries as the independent variable with microcredit as the key intervening variable. Focus group discussions were more fruitful on this issue as they clearly attributed their perceptions, opinions, beliefs and attitude towards factors contributing to poor welfare and though no counting was done all confirmed civil servants’ assertion on factors contributing to poor welfare and low salaries emerged top. 40% believe the flourishing microcredit was mainly fuelled by low salaries.

If

salaries were meeting the basic needs of civil servants then very few would have wanted to engage themselves in borrowing. Economic Meltdown is viewed by interviewees as an environment which facilitates microcredit and is a result of various variables like clueless politicians, surrogate currency [36]

and general mismanagement. The environment can easily be corrected.

Personal

mismanagement recorded 3%. However the low percentage is magnificent as it illustrates a group which may have experienced unfavourable welfare and performance.

4.8

Alternative Sources to Funding. During deliberations with Focus group participants in Mariner Urban on other sources

of funding besides MFIs which were less exploitative, they claimed that banks had joined the “Exploitation Wagon” as they had same tactics with individually owned MFIs of luring customers particularly Civil servants. They even supplied the interviewer with an A4 bank flier which the bank confirmed it originated from their offices. The bank flier was directed to Ministry of Education employees and was titled “Ministry of Education Employees Personal Loan Offer.” An analysis of the flier exhibited the same traits with individually owned MFIs. The loan tenor is two years with 15 percent per annum on the reducing balance, 5 percent arrangement fee, 2.03 percent insurance for the first year and 3.10 percent for the second year thus exceeding 25 percent on the reducing balance. Eligible government employees should have net salary not less than 300 dollars. The bank also offer loan top ups after 12 months of repayment. Another enticing close is the bank’s offer to buy back other bank loans. The processing is done within five days. During the analysis I observed that the interest were usurious. The number of processing days forced civil servants to absent themselves from work. The salary net limit of three hundred was prohibitive to many civil servants as they earn less than three hundred dollars net. The time limit of one year for one to access loan top up was too long for some civil servants. They opt for MFIs privately owned as they offer top up whenever the member wished to access it. Just like the individually private owned MFIs, one would conclude that available loan top ups put civil servants into a debt web. The buyback philosophy forced civil servants to have ballooned credits. Emotional stress is thus not ruled out. Just like loan sharks, failure to repay, the bank has to recover its money through coercive methods likely to impoverish the borrower. Dignity is eroded and family domestic violence inevitable. Given this scenario formal banks cannot come in as alternative sources of funding. All Civil servants preferred “Work Initiated Loan Group Lending Clubs” at work place but said they are poorly managed with no financial security and capacity to service the already impoverished community of Civil Servants sector. [37]

Besides the commercial bank flier another MFI closely linked to the Central bank offered the same services and enticing language, focused on Civil servants. This has proved that no alternative source is safe and guaranteed. The heads of schools and Focus Group participants in all the four districts highlighted that people need to manage and become more responsible rather than looking for alternative sources. This was confirmed by a prominent Microcredit managing director who said that microcredit of these days is for profiteering for sustainability amid a turbulent economy. He said borrowers must also borrow for sustainability rather than consumption and prepare themselves for intervening variables which will make them not succeed and should know that borrowing is a risk business. My conclusion on the matter of alternative sources was that borrowers need financial discipline if they were to reduce observed rampant exploitation by MFIs. All groups involved in the study opted for counselling services as microloans were addictive. Looking for alternative loan sources was simply a way of increasing the debt network. People also need capacity development on uses and management of loan funds. 4.9

Summary: Illegal Practices and Effects on Civil Servants The 195 civil servants agreed that loans contribute to poverty but with varying

degrees. This was collaborated by Focus group and School Heads interviews. However, MFIs directors believe loans they offer had a positive effect especially if beneficiaries make use of loan proceeds and apply financial discipline at every level of use. However the analysis of both fliers show that civil servants are the target and the enticing language quickly lure the desperate members into the debt web with long term negative consequences. All the four categories of respondents unanimously agreed that borrowing coupled with the high usurious interest rates affect the wellness of the borrower. They cited family misunderstanding, ill health, attachment of property, court actions and erosion of personal dignity as having a negative effect on borrower’s wellness.

The economic environment is

characterized by inflation, liquidity crisis, surrogate currency and unpredictable politics making it difficult to realize a fertile economic interventions necessary for growth. Four Focus Group interviews revealed that microcredit has helped much to sustain the welfare of civil servants in a relative way as several borrowers have managed to send their children to school, put food on the table and purchase some household property. They believe that, even though, microcredit long term effects are exploitative, it has rescued many desperate civil servants from total disintegration. MFIs shared the same notion and blame individual civil [38]

servants whose appetite was to spend and not to invest. Some of the participants however, believe that the way microcredit was managed was exploitative as many civil servants engaged in borrowing, has become addictive and caught in the debt web. They survive and rely more on loan top ups and this was not sustainable. Managing projects with high returns and at the same time attending to government business is largely incompatible and there will always be clash of interest. The loans will always be for consumption, rendering civil servants borrowers unproductive. From the different views the researcher’s observation was that microloans were accessed not by choice but circumstances beyond their control.

Loans are more of a

mitigating measure to falling standards of living and by being trapped in the loan web, microloans become a bad way of alleviating poverty and to improve their welfare. MFIs involved in this research has openly told the researcher that they were in business and profit making was their priority and not the welfare of recipients.

This

demarcates the old microcredit operations, which were project oriented and focused on positive transformation of borrowers’ welfare. The new version now led by “loan sharks” is a profit making entity, commercialized for the benefit of owners and investors not the poor and lowly paid community members. Another observation was that these MFIs though bound by RBZ statutes in their registration, they have freedom over their clients and apply unorthodox means to loan defaulters and connive with SSB to ensure timely and consistent deductions for their benefit. The researcher, however failed to confirm with SSB authorities on the case of doing business in microfinance industry and reasons behind continuous deductions when a borrower has fully paid. The findings makes one adopt the opinion that the current or prevailing microcredit is exploitative and has largely a negative effect on civil servants borrowers’ welfare and performance.

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CHAPTER 5

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS 5.0

Summary of Findings

5.1

Transformation of the Microcredit Industry: Observations

The key revelation in microfinance industry is the notable transformation from its major purpose as suggested by early proponents cited in the literature review like Muhammad Yunus’s, a Bangladesh who perfected microcredit, focusing on the poor and lowly paid. Microcredit has evolved to include civil servants who are formally employed with a steady government monitored salaries. The early microcredit thrust focused on investing in income generating projects to sustain the lives and empower the poor with entrepreneurial skills The microfinance institutions have moved away from monitoring their clients and assess the impact of microloans on beneficiaries and give microloans for consumption in some cases without any collateral security. MFIs concentrate and focus on their sustainability and profitability. The industry has become so commercialized and profit making than before. The Non-governmental organisations (NGOs), as indicated in the literature review no longer actively participate in resource mobilization and distribution in order to alleviate poverty. Another credible finding is the participation of banks in microcredit with enticing language to lure the unsuspecting civil servant to enter into a deadly debt web. Initially the researcher’s assumption was that banks were less evil but the fliers and specifically targeting civil servants and applying same tactics as individually owned MFIs, they proved to be unreliable alternative sources of funding but chief culprits in perpetuating the civil servant misery. Domestic violence in some families was recorded. Absenteeism from work due to microloans business was an issue. Some lost their household property after failing to repay monthly payments. Microcredit had many losing their dignity and some addicted to loan borrowing. The whole process undermine the welfare of the civil servant as he or she is vulnerable to loan sharks.

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5.2

Bio data Implications: Most affected civil servants The Bio data revealed a borrowing pattern. New civil servants in the service and

those with 20 years’ experience were active borrowers and above thirty years were very cautious and borrowed only for critical social issues and school fees. This trend seem to stunt economic growth for many civil servants from one year to twenty years’ experience in service as those engaged in borrowing has become addicted and corrupted by the ever available loan top ups thus ending up caught in the deadly debt web. This has serious effects on one’s wellness, dignity and personal economic development. However some few civil servants blamed personal mismanagement by alluding that microloans need personal financial discipline and one needs to confine to what is available and affordable.

5.3

Repayment Mechanisms Basic repayment method identified are through stop order and cash payments. Both

methods have been labelled equally very risk, making the industry vulnerable to economic meltdown. Salary Service Bureau (SSB) at one time failed to remit deducted microloans to respective MFIs Institutions and MFIs demanded cash upfront from borrowers yet it was not their fault but the system.

The current liquidity crisis has a negative bearing on loan

repayments by borrowers, but MFIs want their money, making borrowers having a horrid time to repay the money. It has been noted that cash payments have resulted in many borrowers defaulting not deliberately but the little salaries could not match ballooned budgets of civil servants borrowers. Cash payments are associated with delays, requests for postponement and insufficient repayments or further borrowing from other MFIs to settle outstanding balances. From analysed data this repayment process negatively affect the borrower leaving him or her emotionally stressed and deep in the debt trap. 5.4

Interest Rates Many habitual borrowers no longer know the loan interest rates as they continue

getting loan top ups.

However loan interest rates varied from one MFIs to another and

stretched from 10% to 50% per month making it the most expensive money lending entity. Varied high interest rates reveal a typical illegal practice opposed to RBZ gazetted interest rates pegged 20% per annum maximum. Besides being an illegal practice, it interfered with [41]

the welfare of the borrowers and perpetuated poverty among civil servants borrowers. It was also noted from Bank fliers that interest rate though stated as 15 percent per annum on the reducing balance one has to add other part interest like arrangement fees and insurance per year exceeding 25 percent total. 5.5

Collateral Security The Majority of borrowers getting below $300 dollars loan were not subjected to

collateral in the form of household property. Major documents for one to access a loan included National Identity card, recent pay slip and proof of employment. Collateral was needed for large amounts exceeding 300 dollars in the form of household property and residential stands. Given the current economic meltdown chances of honouring repayment is not always 100 percent. Some have fallen victims to debt collectors and in the process losing their property. As cited before the meagre salaries have proved insufficient to service loans on monthly basis as other demands demand a larger share of the budget. Civil Servants borrowers are always at risk of losing property as failure to repay loans is always imminent. 5.6

Effects of Microcredit on Civil Servants Noted positive effects was that it sustains the lives of many desperate civil servants

and provide relief for many in desperate situations. It is mostly ideal as a temporal rescue package. Notable relief was evident in accessing money for school fees, social problems property acquisition and household consumption. However, the high interest rates undermine all benefits. Thus while the positives seem to be noted, it is done at the expense of civil servants’ core business.

Many became addicted to borrowing and sometimes absent

themselves from work to solve issues related to microcredit. Domestic violence was also evident and squabbles over delays or non-payment between MFIs and borrowers led to court action and use of paralegal and debt collectors and other coercive methods like taking borrower’s property, thus affecting the wellness and dignity of borrowers. Basing on the negative points Microcredit drove some to desperation and more likely poverty having a serious effect on their welfare and performance. Emotional stress, absenteeism from work and domestic violence took its toll. 5.7

Poor Welfare concept Highest percentage pointed at low salaries as the major culprit leading to poor welfare

followed by microloans, economic meltdown and lastly personal mismanagement. All civil [42]

servants, including MFIs believe that microloans were not independent but largely influenced by other variables for it to flourish. Low salaries was the driving force behind addictive borrowing. Economic meltdown as a variable helped to erode the borrowed money value notably through inflation and liquidity crisis and in particular surrogate currency in Zimbabwe which cannot compete with other recognized currencies. The amount of money borrowed ranging from $50 to $300 at a time is viewed as insufficient to be invested in a lucrative business. Most of the money is borrowed for immediate consumption and the borrower will use his or her salary to repay the loan putting pressure on the low or meagre salaries.

Poor welfare is inevitable. Thus given the illegal

practices microcredit has an effect on Civil Servants. It has been proved that Microcredit is noble but issues of wrong use, over borrowing and high interest rates has contributed in making Microcredit a burden rather than a reliever. 5.8

Conclusion From the questionnaire responses, focus group interviews and discussions,

Microcredit has an effect on civil servants with varying degrees but can be generalized to every civil servant borrowing from MFIs. The Microcredit positive results are immediate and not long term.

They are a

response to a crisis which respondents pointed to low salaries and an inflationary environment characterized by liquidity crisis, surrogate currency and poor economic policies. Given the environment, illegal practices were inevitable. High usurious interest rates to curb inflationary spill overs and coercive measures to ensure timely repayments and profit were inevitable in a commercially driven industry surviving in a slippery economic environment. Microcredit did have negative effects on welfare and performance. Absenteeism means less working hours and non-fulfilment of aims and objectives. . Being absent has an effect on planned work which is always in arrears thus civil servants performance is compromised. Having a loan burden has proved to undermine the borrower’s dignity and wellness. Domestic violence and partner misunderstandings has a bearing on the family social fabric. The way Microcredit is administered does not empower the civil servant to get returns for sustainable personal development, but just to consume, diminishing the low salaries through repaying the loan. Poverty is thus cyclical and affect civil servants borrowers. [43]

Microcredit has proved to cause financial imbalances, creating problems in households and it is the children who suffered more as they had to make do with emotional abuse which they witness from their parents. The little benefits are thus outweighed by the damage experienced by borrowers The original conceptual framework where microcredit was the independent variable was replaced by low salaries. Civil servants in the borrowing category acknowledged that microcredit was an intervening variable responding to prevailing economic conditions. The borrowing process, interest rates, collateral security and repayment procedures revealed illegal practices with a negative bearing on the welfare and performance of borrowing civil servants community. Microcredit has been proved to have illegal practices which affected the borrowers mostly the 1-5years and 16-20 years’ experience, thus having an effect on the welfare and performance of Civil Servants on the borrowing list.

5.9

Recommendations Microcredit is not all that bad. Literature on microcredit especially assessments on its

impact highlighted success stories and cites relative improvement in terms of quality life realized by microcredit beneficiaries. However, the model of microcredit which focuses on already employed people has proved to be responding to a crisis not of pure poverty in its sense. It is a supplement to poor salaries. This new version of microcredit cannot be removed and the initially suggested solution of looking at other alternatives has been ruled out. The banks has joined the lucrative profit making MFIs and make same or even more demanding loan conditions and thus cannot be suitable alternatives. As suggested by participants during interviews alternative sources is not a solution but to make people adopt a new mind-set necessary for individual transformation. Suggested solutions to reduce negative effects are:

a)

RBZ or Ministry of Finance to establish policing personnel to ensure common standards in terms of interest rates, borrowing levels, repayments mechanisms, loan management and impact assessments as it is responsible for monitoring monetary policy. [44]

b)

Guidance and Counselling at work place on issues of wellness, dignity and domestic violence by respective ministries to curb side effects of microloans and reduce direct consumption by encouraging investment microcredit.

c)

Government to increase civil servants salaries to beat the poverty datum line so that they access the basic life needs and avoid reliance on MFIs.

d)

Encourage and regularize home grown or club lending houses at work places to cater source of money and a way to avoid usurious interest rates and unwarranted travels.

Areas For Further Study The findings had limitations in that they are confined or restricted to civil servants in the education sector mainly teachers and lower grades administrators. It is perhaps difficult to generalise the effects of microcredit to the whole civil service sector and other workers in the private sector and parastatals. A more comprehensive study is still necessary and appropriate to come up with a grand analysis inclusive of all civil servants.

[45]

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APPENDICES Appendix 1 QUESTIONNAIRE FOR TEACHERS AND GOVERNMENT WORKERS

Place a tick (√ ) where appropriate in the boxes provided and provide your own views on some questions

SECTION A

Sex:

Female

Male

Status:

Teacher

Admin Officer

Account

Audit

District Office

Province

Stationed at:

School

No. of years in service:

1-5 years

6-10 years

11-15 years

16-20 years

21-30 years

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31 years plus

SECTION B

1. Have you borrowed money from MFI?

Yes

2. How much did you borrow?

No

$50 - $100 $101-500

$501 – 1000

$1001 – 2000

$2000 plus 3. How many times have you borrowed so far?

Once Twice

Thrice

Several times

4. What was the repayment mechanism?

Stop order Cash payments

5. What was the interest rate?………………… 6. Was the interest rate

Fair Good

Not fair

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Not good

7. Did you give collateral security before receiving the loan: 8. If yes what was the collateral items

Yes

No

Household property Livestock

Buildings

Vehicle

Other

9. Did you lose property due to failure to repay loan?.

Yes

No

10. Some say getting a loan is a long process. How long does it take for one to access a loan? Few hours

One day

Two days

3-7 days

More than a week

11. Do you at one time absent yourself from work to solve your loan processing and payment? Yes

No

12. Have you used the loan for its purpose:

Yes

13. The loan you borrowed was for:

School fees Buying property Consumption [51]

No

Social problems

14. Do you think loan borrowing is addictive?

Yes

No

15. MFIs advertise calling for loan top up. What makes one need top up? Insufficient previous loan

Insufficient salaries

Used to borrowing

16. Have you ever been emotionally affected by loan burden? Yes

No

17. Did this emotional discomfort at one time affect your work commitment? Yes

No

18. Which one do you think contribute to poor welfare? Economic meltdown

Low salaries

Microloans

Poor self management

19. Did you experience any form of domestic violence in your home because of loans? Yes

No

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SECTION C

Comment on the following:

a) Loans contribute to poverty…………………………………………………………… ………………………………………………………………………………………….

…………………………………………………………………………………………..

b) Loan burden affect borrower’s wellness……………………………………………… ………………………………………………………………………………………….

………………………………………………………………………………………….

c) Is microloans a better way of alleviating poverty and improve your welfare?………… ………………………………………………………………………………………….

………………………………………………………………………………………….

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Appendix 2 FOCUS GROUP SURVEY QUESTIONS

1. How many have you borrowed money from MFIs in this room?: ………………………………………………………………………………………

2. Why do people borrow money?…………………………………………………… ………………………………………………………………………………………..

3. Are you comfortable with the interest rates?................................................................. ………………………………………………………………………………………….

4. What are the different interest rates you have been charged?......................................... ………………………………………………………………………………………….

5. How many believe loans are developmental and in what ways?.................................... …………………………………………………………………………………………..

6. How many believe loans are non-developmental and in what ways?.............................. ………………………………………………………………………………………......

7. Do you think MFIs develop civil servants through loans?............................................... …………………………………………………………………………………………..

8. If not what are the challenges?......................................................................................... [54]

………………………………………………………………………………………….. 9. Do you think Microcredit has an effect on civil servants welfare and performance…... a) Welfare….…………………………………………………………………….......... …………………………………………………………………………………………..

b) Performance.……………………………….……………………………………….. …………………………………………………………………………………………...

10. What do you think is the most contributor to Civil Servants poor welfare a) Microloans b) Low salaries c) Poor personal management d) Poor economy

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Appendix 3 MICROFINANCE INSTITUTIONS Tick (√ ) in the box provided for your corresponding answer 1. What loan services do you offer to civil servants? Education (fees)

Social problems

Consumption

Property acquisition

Whatever the member wants

We do not ask for the purpose of the loan

2. What is the minimum/maximum do you offer as loan? Minimum……………………..

Maximum………………………….

3. How do you recover your loaned money from civil servants Stop order

Cash payments

4. Do you consider collateral before issuing loans to civil servants? Yes

No

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5. In the event of non-payment what methods do you put in place to recover your money? Court action

Member’s household property

Other coercive methods

Approach guarantor

6. Do you think Civil Servants are to blame for failing to develop themselves? Yes

No

7. Have you experienced domestic violence as a result of microloans in members you service with loans? Yes

No

8. Do you think loan have a positive bearing on your borrowers’ lives? Yes

No

9. Some say processing of loans can be done at any time. Do you witness some Civil Servants coming to process microloans during working hours/days? Yes

No

10. Why do you think many Civil Servants have turned to microcredit more than before? Low salaries

Poor self-management

Collapsing economy [57]

Poverty Appendix 4

HEADS OF SCHOOLS

Tick (√ ) in the box and write in the box provided or space where applicable

Sex

Male

Female

No of years in service

No of years as a head at the station

Do you have teachers benefitting from Microfinance Institutions?

Yes

No

If the answer is yes, how many beneficiaries are at your station? 1-2

3-5

More than 5

Are you experiencing challenges associated with microcredits by teachers such as

1. Absenteeism 2. Training 3. Lesson disturbances by MFI visits to defaulters [58]

4. Family squabbles

Violence

5. Continued loan top ups

6. Do you think microloans bring individual dignity or wellness? Yes

No

7. If the answer is no what have you observed in microloans which erode one’s dignity ………………………………………………………………………………………….

………………………………………………………………………………………… 8. From your experience write what you have experienced on your teachers concerning the welfare and work performance of teachers engaged in microcredit ……………………………………………………………………………………………….

……………………………………………………………………………………………….

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Fliers Standard Chartered Bank

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[62]

[63]

[64]

[65]

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[67]

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