NPLs drop to 8,63 percent 

Source: NPLs drop to 8,63 percent | The Herald December 11, 2017

Livingstone Marufu Business Reporter
Non-performing loans (NPLs) dropped to 8,63 percent this year from 20,5 percent in 2015, raising expectation the financial services sector is becoming more stable.

Although the NPLs have declined to single-digit figures, they remain above the 2016 year – end target of 5 percent set by the Reserve Bank of Zimbabwe (RBZ). There are fears that while cutting back on lending might help maintain stability in the financial services sector, it will negatively impact on local economic activities as this affect loans uptake due to stringent measures. Most companies are struggling to access finance for working capital requirements, while the credit has been expensive where available.

While presenting his 2018 budget, Finance and Economic Planning Minister Patrick Chinamasa said: “The quality of the banking sector loan book has gradually improved over the years to 8,63 percent as at end of September 2017 from a peak ratio of non-performing loans (NPLs) to 20,45 percent in September 2015.

“Banks have continued to strengthen their credit risk management systems, to complement the reduction of NPLs arising from the disposal of their toxic assets to ZAMCO.”

This will contribute to more robust credit risk management practices, which will help promote the safety and soundness of the financial system. Experts believe that the creation of a credit registry system will reduce curdling loans even further.

Creditinfo, a Czech Republic credit checker, was in April 2016 awarded the tender to set up the RBZ’s credit bureau system at a cost of $1,8 million. Currently, banks use the Financial Clearing Bureau (FCB), which only keeps a register of defaulters and judgments.

The system is expected to improve the performance of the financial sector and stimulate economic development by making lending and borrowing easier, faster and ultimately cheaper. The availability of timely and accurate information on borrowers’ debt profiles and repayment history enables banks to make informed lending decisions.

The Reserve Bank of Zimbabwe has made significant progress in enhancing the credit infrastructure through the establishment of a Credit Registry and Collateral Registry. This initiative is improving the quality of loans in the banking sector, through removal of information asymmetry and broadening collateral required by banks.

RBZ will continue to intensify consumer awareness programmes and introduce value added products that will enrich stakeholder experience, including convenient access by consumers to their credit reports via mobile platforms. The Zimbabwe Asset Management Company (Zamco), an arm of the RBZ, has taken over close to $1 billion worth of toxic debt off banks’ balance sheets since it was established in 2014.

In the South African financial services sector, NPLs are forecasted at 4 percent for 2017, while the ratio for Zambia and Botswana stands at 6 percent and 4 percent, respectively.