By Wilfred Musape and Mwalimu Siyumbelo
The levels of indebtedness in terms of loans among many workers both in the public and civil service in Zambia can be described as staggering as almost every civil servant has a loan running or has at one time been exposed to one. However, it is worth noting that the levels of indebtedness has the capacity to break the morale of employees which subsequently affects output and this has been aggravated by the “never” ending tenure of these loans due to the fluctuations in the lending rates.
However this situation has not gone unnoticed by the employer having observed the impact which the indebtedness of employees is having on their overall work attitude be it with a teacher, a nurse, a doctor etc. A statement by government on the plan to engage it’s workers through a debt swap as a form of relief to reduce indebtedness is a timely and welcome decision.
A. What is a Debt Swap?
A debt/equity swap is a transaction in which the obligations or debts of an individual are exchanged for something of value or equity. This is all aimed at providing relief for an individual to avoid a situation where the debt becomes unbearable leading to bankruptcy and in the case of public servants, leading to low morale affecting output.
The debt swap comes with its own conditions attached as per the legal arrangement entered between individuals or institutions. However, at the moment the government has left it to stakeholders to negotiate for what would be convenient to all partners involved.
In the case of the proposed debt swap, the employer proposes to exchange the debt that civil and public sector employees have with different financial institutions with equity like leave days, settling in allowances which government owes many of its employees.
What are the recommendations in making this a reality?
The debt swap being proposed by government through the Public Service Management Division (PSMD) is a good move and it will be more meaningful if the following recommendations can be added to the ” *debt swap proposal”.
1. Apart from buying off loans in form of leave days or settling in allowances by the employer.
We recommend that the Public Service Management Division (PSMD) engages the Public Service Micro Finance Company (PSMFC) to begin a process of buying off the loans and refinancing them with flexible terms at the 5% interest rate threshold from Micro and Macro financial institutions that might have lended monies to civil servants.
The advantage of this move, is that it will reduce the amount of money being deducted from these employees hence increasing their liquidity which is likely to boast their morale towards work.
For example, if a civil servant is currently being deducted K2500 for a loan gotten from Micro or Macro financial institutions. He/she is likely to receive a debt relief if the Public Service Micro Finance Company (PSMFC) was to refinance that loan and re-loan to it to him/her at 5% interest rate.
Given the prevailing high interest rate of above 25% of the loans gotten from Micro and Macro financial institutions.The civil servant might even get back his/her K2000 on the payslip as debt relief if PSMFC was to be engaged.
2. Once this is done, the employer may increase the threshold that should be left untouched on employee payslips between 60-80% so that this situation that has entangled many civil and public service employees does not reoccur in the future.
“Remember a healthy employee financially is a motivated employee”
We submit