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Trade Credit in Zimbabwe

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?a) Trade credit in Zimbabwe has been declining in past few years. The decline could have been caused by inflation unemployment rate, unavailability of commodities, low disposable income, Diaspora and bad debts, poverty and decline in banking sector. The writer is going to discuss these causes of the of trade credit. Credit is the ability to obtain goods or services before paying for them, based on the promise to pay later. Credit can be in the form of loans, overdrafts and trade credit. This write up is all about the decline of trade credit in Zimbabwe of late. Inflation was the sole driver of credit buying and selling in the business sector. Inflation is the general rise of prices of goods and services. Businesses which trade on credit follow inflation rate of the economy. If the inflation rate is high, businesses tend to restrict to offer credit facilities to its customers. This is because selling on credit during inflation may lead to loss making in company. So, selling on credit declined during the period of 2007 to 2009 due to high inflation rate. (Muponda, 2009) Inflation may cause customers to stop buying on credit because traders charge high prices on their goods and services during high inflation. This is because their mark-up include the inflation rate. Customers opt to buy on cash than on credit during high inflation of the past years. High prices on commodities during high inflation cause credit buying to decline. For instance, buying on hire purchases agreement during high inflation, have high deposit and short installment period. This scared buyers from buying on credit, hence reduce credit buying. (Whitcomb, 1990) Another factor to be considered on the decline of credit buying and selling in Zimbabwe is the unemployment rate. During the past few years Zimbabwe has high unemployment rate of about 80%. Traders hesitate to offer credit facilities to unemployed customers. (Schwartz, 1998) This means that increase in unemployment rate lead to decrease in credit buying and selling in Zimbabwe of late. Unavailability of commodities also causes the decline of credit buying and selling in Zimbabwe during the period of 2007 to 2009. Suppliers do not offer credit to customers when their stock is not adequate. In the past years most of the commodities were in short supply. Suppliers restrict credit selling in order to meet demand w

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