What is an Escrow Service?
An Escrow Service is a facility to protect buyers, as well as assure sellers of their payment, through provision of an intermediary who ensures that goods or services are delivered as specified by the seller, prior to the buyer's money being released to the seller. The intermediary is known as the Escrow Agent.
Who is the SME Association of Zimbabwe?
We are an Association with over 300 subscription-paying members in various sectors across the economy, as well as across the country. Details of our history are available here. You can view these members on our Business Directory. Each of our members signs a Service Level Agreement with the Association which compels them to abide by six core value standards, namely:
- Good customer service
- Quality service/product
- Fair pricing
- Adhering to delivery timetables
- Honesty and integrity
- Knowledge, skill and experience
In addition to the above, we also have 18 Affiliate Members, who are large corporations that also provide products and services to SMEs. You can also buy from them using the Escrow facility.
How does this service work?
As illustrated in the picture above, The SME Association of Zimbabwe comes in as the Escrow Agent, standing between the Buyer and the Seller. A Buyer wanting to purchase any member's products or services gets in touch with the supplier to confirm product availability, as well as to inform them that they would like to purchase using the Escrow facility. They then get in touch with the Association, at which point a three-way agreement is generated between the Buyer, Seller and the Association.
The Buyer then deposits the purchase price into the Escrow bank account, which is a trust account specifically for facilitating these transactions. Immediately upon confirming transfer of fund, the Association will inform the Seller to deliver the products / services according to the agreement. Once the Seller has delivered, and delivery has been confirmed by the Buyer, their representative or by the Association, funds are then released to the Seller.
The Escrow service can also be used/initiated by Sellers, particularly in instances where they are required to provide a service or product before getting paid.
Who can use the service, and when?
The service can be used by both Buyers and Sellers, for any kind of good or service.
Typical Buyer-initiated transactions would be:
- A Buyer who is geographically distant from the Seller of the goods or services they wish to purchase, such as:
- Someone in the Diaspora wishing to purchase an asset, services or even just groceries back at home.
- A person in Bulawayo wishing to purchase an asset or service in Harare, who requires an independent and reliable agent to oversee the transaction on their behalf.
- A person who may not be an expert in the type of transaction they want to enter into, and need assurance that delivery is in order, e.g. person wishing to build a house using a contractor who is a member of the SME Association of Zimbabwe*.
- Someone wishing to only pay for a service or product upon satisfactory delivery by the Seller.
*Additional charges will apply.
Examples of Seller-initiated transactions would be as follows:
- Seller who wishes to be assured of payment on delivery, and would want the Buyer to deposit funds on Escrow prior to performance.
- Seller wishing to transact with a third party who may not be in the same geographical location, or country, and wishes to be assured of payment.
What are the fees for this service?
Escrow Fees are a basic flat fee of $20 (includes 2% transaction fee) and a sliding fee of between 6% and 1% for amounts over US$200. Additional charges may apply for delivery, as well as inspection/certification services. These will be calculated separate of the basic Escrow fees indicated here. A quote for specific charges that will apply for a specific transaction can be availed on inquiry, at no charge.
Escrow charges are paid by the initiator of the Escrow transaction. Some Sellers may, however, opt to pay the Escrow fee on behalf of Buyers.