Flamboyant lifestyles, political interference fuel loan defaults: CBZ boss

ROBIN PHIRI

Zimbabwe’s banking sector is being undermined by “exotic flamboyant lifestyles” and political interference as some artisanal miners and SME owners divert bank loans to luxury cars and then seek political protection to avoid repayment, CBZ Holdings Chairman Luxon Zembe has warned.

This lays bare deepening concerns over credit discipline.

In an interview with The Business Times, Zembe said the problem starts with poor leadership standards in both the public and private sectors, arguing that a culture of flaunting wealth without solid financial foundations has created a dangerous blueprint for the country’s younger entrepreneurs.

“It’s starting from high up you know leadership across private [and] public enterprises,” Zembe said. “What we are also saying as financial institutions is that the politicians must come to the party and work with the banks and not entertain people who go to them when they fail to pay and then try to use political connections or political muscles to try and avoid paying back money because as I said earlier on the money that the banks have are public funds… if I give you public funds you must bring it back because the public wants their money — the depositor wants their money back.”

He said banks are increasingly placed in difficult positions when borrowers misuse funds.
“If we give somebody who then goes and buy an expensive car, you know, misuses that money — who is going to pay? And this is where the banks find [it] difficult,” he said.

Zembe said the perception that banks deliberately avoid lending to SMEs is largely misplaced, insisting that discipline, accountability, and proper business management remain the foundation of bankable projects.

“SMEs feel that the banks are not prepared to support them; meanwhile, no — banks are there as long as people are disciplined, stick to the business, run their business properly, be accountable, pay back the money. The banks are more than happy to support such people,” he said.

The CBZ chairman described a growing trend among some SMEs and artisanal miners where loans intended for working capital and business expansion are instead diverted to flashy vehicles and lavish lifestyles — behaviour he said is financially ruinous for both individuals and companies.

He warned that defaults often escalate when borrowers rely on political networks to evade repayment. “If someone misuses the money and seeks political protection, who ultimately bears the loss?” he asked, emphasising that bank loans are public funds that must be safeguarded.

Zembe said the spread of “this exotic flamboyant lifestyle” has created warped expectations among younger businesspeople.
“As a result, once a lot of people get money all they think of is, how do I also get a car which is like so-and-so, right, and flash around… leading a flamboyant lifestyle which is false… when actually they don’t have the resources to be able to do so. And this is where financial literacy comes in,” he said.

He linked the behaviour to the rise of Ponzi schemes and other high-risk shortcuts that have devastated families and businesses — sometimes fatally. He said people who attempt to sustain unsupportable lifestyles often spiral into debt traps, health crises, and even suicide.