ZIMLoan has rapidly become a household name in Zimbabwe, offering accessible microloans in a country where traditional banking services are often out of reach. Our recent informal survey suggests that a significant portion of Zimbabweans have either used ZIMLoan or know someone who has. However, a growing chorus of complaints alleges that ZIMLoan’s advertised rates don’t paint the full picture.

Here at ZimPriceCheck, we decided to investigate these claims. While we found no evidence of outright fraud, our analysis reveals that ZIMLoan’s fee structure, particularly the administration fee, significantly increases the true cost of borrowing, often exceeding the initially advertised interest rate.

The Allure of ZIMLoan in a Credit-Starved Economy

Unlike many developed economies, Zimbabwe faces significant challenges regarding access to credit. Traditional banks rarely extend loans, especially to the informal sector. Credit cards are uncommon, and many Zimbabweans lack the formal employment, collateral, or guarantors required for traditional bank loans.

ZIMLoan entered this landscape offering a seemingly simple solution. As a registered microfinance institution with the Reserve Bank of Zimbabwe (RBZ), the company focuses on ease of access. Their minimalistic website, zimloan.co.zw, emphasises their services rather than their corporate structure. The process is streamlined: you register online, upload your ID, and, as a first-time user, you can borrow a small amount (up to US$10, subject to administration fees as we will discuss later).

The ZIMLoan Process: Simple, But Not Entirely Transparent

The ZIMLoan process unfolds as follows:

1. Registration: Create an account using your EcoCash or OneMoney mobile number.
2. Loan Application: Log in, navigate their website Zimloan.com, select the desired loan amount using an on-screen slider.
3. Initial Disclosure: The portal displays the total repayment amount, including the advertised interest (e.g., 20% for a 14-day loan).
4. Loan Officer Contact: Upon borrowing, a dedicated loan officer maintains regular contact via SMS and phone calls to ensure repayment. The intensity of these communications increases as the due date approaches.
5. VIP Status: Consistent repayment can lead to “VIP” status, which unlocks higher borrowing limits and reduced communication from the loan officer.

While this process seems straightforward, the devil, as always, is in the details.

The Sneaky Part: Administration Fees and Effective Interest Rates

The crux of the issue lies in the administration fee, a charge levied on each loan that is not prominently displayed during the initial stages of the application process. In fact, borrowers will only learn about this fee just before they confirm their intention to take the loan out. The administration fee is usually charged a 10% rate. For example, if you apply for a US$15 loan, you actually receive only US$13.50, with US$1.50 deducted as an administration fee. However, you are still required to repay the full US$18 based on the initial US$15 amount.

This administration fee significantly inflates the effective interest rate, making ZIMLoan loans far more expensive than advertised. For example, consider the scenarios below:

Case 1: Borrowing US$15

• Loan Amount: US$15
• Administration Fee: US$1.50
• Actual Amount Received: US$13.50
• Repayment Amount: US$18
• Total Cost of Loan: US$4.50 (US$3 interest + US$1.50 administration fee)
• Effective Interest Rate: US$4.50 / US$13.50 * 100 = 33%

Case 2: Borrowing US$30

• Loan Amount: US$30
• Administration Fee: US$3
• Actual Amount Received: US$27
• Repayment Amount: US$36
• Total Cost of Loan: US$9 (US$6 interest + US$3 administration fee)
• Effective Interest Rate: US$9 / US$27 * 100 = 33%

As you can see, the effective interest rate far exceeds the advertised 20%. This is because the administration fee is applied to the initial loan amount, even though you do not receive the full sum.

ZIMLoan Versus Loan Sharks: A Surprising Comparison

Our research suggests that the rates charged by traditional loan sharks, while undoubtedly risky, is actually lower than what ZimLoan is charging even before we consider the administration fee. A typical loan shark in Harare charges around US$30 interest for every US$100 borrowed, translating to an implied interest rate of 30%. At first glance, this may seem more than ZIMLoan’s advertised 20%. However, you need to remember that ZimLoan’s loans have a 14 day repayment period while loan sharks require payment after a period of up to a month from the day when they give out the loan. To get a 28 day loan (not even a month) you will need to borrow and repay the loan twice. You get charged interest twice. So this results in an effective monthly rate of 40% going by advertised rates or a staggering 66% if we factor in the administration fee. This means every month each dollar you actually get from ZimLoan will cost you US$0.66. Now that is steep.

The Hidden Costs of Cash-Out

The majority of Zimbabwe’s economy operates on a cash-only basis. This means that ZIMLoan borrowers must cash out their loans, incurring additional fees in the process.EcoCash, the predominant mobile money platform, charges a fee for cash-out transactions. This fee further reduces the actual amount received by the borrower and adds to the overall cost of the loan.

Worse still, there are fees when you pay back the money. Paying back Zimloan requires dialling 151100# and this is important, it means you do not need to use your ecocash account, you can use other people’s. However, even with this, there is still a fee charged which is around US$0.60 if you are paying back US$18 for a loan of US$15. So if you borrow US$15 you actually get cash of US$13 if you decide to cash out but the total cost including Ecocash fees will be around U$18.60. The cost of this loan to you will be US$5.60 this gives an effective cost of US$0.43 per dollar each time you get this loan. If you were to do this twice (i.e. to cover a period of one month) you would pay a total of around US$0.86 per each dollar you get as cash. In comparison a loan shark will charge you 30 cents on the dollar.

Frequently Asked Questions

Q: Is ZIMLoan a legitimate company?

A: Yes, ZIMLoan is a registered microfinance institution with the Reserve Bank of Zimbabwe (RBZ).

Q: What is the advertised interest rate on ZIMLoan loans?

A: ZIMLoan advertises an interest rate of 20% for 14-day loans.

Q: What is the administration fee?

A: The administration fee is a charge levied on each loan, typically around 10% of the loan amount. It is deducted from the loan before disbursement.

Q: How does the administration fee affect the actual cost of borrowing?

A: The administration fee significantly increases the effective interest rate, making ZIMLoan loans more expensive than advertised.

Q: Are there additional fees associated with ZIMLoan loans?

A: Yes, borrowers may incur EcoCash cash-out fees when withdrawing their loans, further increasing the overall cost.

Conclusion: Proceed with Caution

ZIMLoan provides a valuable service in a country where access to credit is limited. However, borrowers should be aware of the hidden costs associated with ZIMLoan loans, particularly the administration fee and cash out fees. By understanding the true cost of borrowing, Zimbabweans can make more informed financial decisions.

While ZIMLoan technically discloses all fees, the lack of transparency and the positioning of the administration fee within the loan application process can lead to borrowers underestimating the actual cost of their loan.

We encourage ZIMLoan to adopt a more transparent approach, clearly displaying the effective interest rate, including all fees, upfront in the loan application process. This would empower borrowers to make informed decisions and avoid potential debt traps.