THE Reserve Bank of Zimbabwe has cancelled the licence for McDowell’s International, a money-lender, for contravening the Banking Act and illegally mobilising US$4 million in deposits. McDowell’s
International’s licence was cancelled after the company failed to adhere to ethical business practices and for charging exorbitant lending rates, averaging 600 percent per annum.
Depositors are now failing to access these deposits, prompting the central bank to liquidate the institution to compensate the depositors.
“Proceedings for the liquidation of the institution have commenced and the liquidator will be mandated through the High Court to dispose of the institution’s assets, including recovery of funds siphoned from the shareholders’ companies in order to reimburse the duped members of the public,’ said the RBZ.
In terms of the Banking Act, money-landing institutions are not allowed to accept deposits, which is the preserve of registered banks.
In a statement yesterday, the central bank said McDowell’s International shareholders admitted to mobilising deposits and charging astronomical lending rates for personal interests.
Deposits accepted by McDowell’s International amounted to US$4,13 million since dollarisation, with a tenure of between three to 12 months.
McDowell’s has 21 branches countrywide and is owned by Mr Member Chipamba and Mrs Linda Chipamba, with 50 percent shareholding each.
Several meetings were held with the central bank after complaints from the clients.
It is also alleged that McDowells International was deducting loan repayments from civil servants without their consent.
McDowell’s allegedly used the Salary Service Bureau stop order system to deduct the money.
In various correspondence to the Reserve Bank, clients complained of unexplained deductions at 600 percent per annum, which is about 512 times more than the average lending rate of about 25 per-cent.
Clients were not presented with the interest rates calculation. Upon obtaining a loan, a client had their ATM cards and passbooks confiscated as debt security.
McDowell’s also levied penalty charges on the principal interest accrued while they over-deducted loan payments through SSB.
In a meeting with the RBZ on Monday this week, Mr Chipamba admitted taking deposits under McDowell’s International Properties Investments, one of the companies in the McDowells Group.
Mr Chipamba said the deposits were meant to finance the construction of hotels in Masvingo and Bulawayo, as well as capitalising the money-lending business.
He told the RBZ that US$1 million of the deposits was used to fund the construction of Lee’s Inn hotel in Masvingo.
Another hotel is still under construction in Masvingo. In a bid to save the company from liquidation, the McDowell’s shareholders offered to pay back the US$4 million in 12 months, using proceeds from Lee’s Inn.
McDowell’s seven-member board, including the shareholders, has also been declared unfit to hold any significant shareholding or position of accountability in the financial sector.
RBZ Governor Dr Gideon Gono has warned the public to “take heed” that microfinance and money-lending institutions were not allowed to take deposits.
“Members of the public should thus desist from dealing with such unscrupulous institutions and individuals as they risk losing their hard-earned savings to corrupt and greedy individuals,” said Dr Gono.