Zimbabwe Bank Beefs Up Loan Offerings

No, cattle banking isn't the latest loyalty program from Burger King, or Omaha Steak's entrance into digital currency.

Recently announced by TN Bank, a former finance house and current retail and commercial bank,cattle banking is a new financial offering available to consumers in Zimbabwe for the first time. 

And while the concept might sound humorous to Westerners, cattle banking could emerge as a more widely adopted solution to Zimbabwe's economic inflation. TN Bank has said it may be correctly geared to the unique needs of the East African nation's primarily agrarian economy.

But how does cattle banking work? The Associated Press recently visited TN Bank to speak with its representatives near Marondera, a small town located in the northeastern part of the country.

It found that cattle banking operates on the same principles as traditional banking, with notable exceptions. TN Bank accepts cattle as collateral for loans and also runs several fast food outlets. 

Still, while the new offering may offer benefits for the bank's customers, there's a financial incentive for it to test this market. Zimbabwe is home to an estimated 3.5 million cattle owned by non-commercial ranchers. In all, these animals are valued at more than $1 billion.

How Does Cattle Banking Work?

Cattle banking allows depositors to obtain loans of up to the value the bank determines after assessing the cows. When a transaction is completed, owners receive a "Certificate of Cattle Deposit" to verify the transaction, and the bank keeps the cows.

Owners who deposit cattle in a cattle bank are paid 10 percent interest on the value of their cows each year for an initial period of two years. This annual earnings can be paid out in cash or in cows. After the introductory period has passed, owners have the option of regaining their cattle or leaving them in the bank's possession. Aging cattle that are part of active loans may be slaughtered, sold for consumption and replaced by a cattle of the same value. 

In the event that the debtor cannot repay, the cow is seized by the bank. Should the debtor pass away, a family member can take up the outstanding loan and repay the debt to reclaim the animals.

A Win For Banks and Customers?

Cattle banking addresses a real problem for many farmers in Zimbabwe. When they fall on hard times, they may not be able to keep their herds healthy. This problem affects both the owners and the cows. Owners suffer from the loss of potential earnings and the cows may die or become lost or stolen.

The AP spoke to husband and wife William and Elizabeth Mukurazita, both in their 60s, who had deposited 24 cattle at TN Bank. The couple had 20 of their animals succumb to poor health after their own health issues caused them to stop caring for the cows.

"If we only knew about this cattle banking before, we could have saved all of our herd," Elizabeth Mukurazita told the source.

Once in possession of the bank, the Mukurazita's cows, like others processed by TN Bank, were likely transported to paddocks where they were fattened and bred. There, the cows are given veterinary care to ensure that they will provide value to the banks during their stay. 

Still, despite the medical care the animals receive, the bank is still a business. The report mentions one incident in which a representative turned away an unhealthy animal, though officials knew it might not survive on its own.

For a more detailed look at the bank's new offering, read the AP's full report here.

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