Tinashe Farawo —
The Zimbabwe Asset Management Company has absorbed non-performing loans (NPLs) worth nearly US$1 billion since its establishment.
Authorities created Zamco in 2014 to take over NPLs after an insidious culture of dishonouring credit obligations took root, inhibiting banks from providing fresh loans to the market.
Zamco has been assuming mortgage bonds, non-insider loans and NPLs for companies in good stead.
It mobilised Treasury Bills for banks to get liquidity and has been converting NPLs into performing loans via debt restructuring, among other strategies.
Zamco chief executive Dr Cosmas Kanhai told The Sunday Mail, “We have already taken over US$812 million in non-performing loans and are left with US$200 million. The last day for taking up these loans is March 31, 2017, and this is meant to help clean up the balance sheet of banks.
“We managed to cut the ratio of non-performing loans to total loans issued to 7,8 percent by December 31, 2016, and I am sure by the time we review the process at the end of the first quarter of 2017 it will be less.
“Taking over NPLs has benefited both banks and companies as banks will unlock funds while companies get long repayment periods and more time for turnaround.
“We managed to set up a fund to help finance the purchase of bad loans from banks, and Government gave assurances that all the coupons will be paid on time and fully on maturity so as to give confidence in the economy.”
At a research symposium on the “Impact of Non-Performing Loans on Bank Liquidity post-dollarisation” in Harare last Friday, researcher Mr Brighton Chinyemba said: “A major challenge for commercial banks is the issue of non-performing loans, which scholars have pointed out as representing blocked income as well as reducing liquidity levels.
“. . .Of all the independent variables only credit risk, bank size and NPL emerged as negatively and significantly related to liquidity and the rest of the variables did not have significant impact on liquidity. The negative correlation of bank size is contrary to extant literature and should be viewed against the context of the new strategy.”
Economist Dr Gift Mugano added: “The banks need to resuscitate traditional banking products so as to continue leveraging on their brand equity in this arena. At corporate banking level, the issue of collateral is not perfect and capacity to repay was questionable. Politically-connected borrowers, insider loans and the high interests rates of around 35 percent are some of the causes of NPLs.”