via RBZ alarm as bad loans hit 90 percent 01 October 2014
THE level of non-performing loans (NPLs) in the banking sector has reached ‘frightening’ levels after it emerged that some banks had a bad loan ratio of up to 91 percent, a senior central bank official said on Wednesday.
RBZ head of supervision, Norman Mataruka, told delegates attending a World Bank meeting that the absence of a credit reference bureau and liquidity constraints had seen NPLs spiking to an industry average of 18 percent as at June from nearly three percent at the introduction of the multiple currency regime five years ago.
“We are having a challenge in terms of the high level of non-performing loans in the market. In 2009 we were around three percent in terms of the average non-performing loans,” Mataruka said.
“As at end of June we are currently sitting at 18,5 percent. We actually have a few banks, about five, whose average non-performing loans are 76 percent with some banks at 91 percent. This is actually a frightening trend and we have seen that this particular challenge needs to be resolved.”
He said the central bank has engaged the financial service sector with a view to setting up a credit reference bureau in a bid to lower the level of NPLs.
The central bank has also formed a new special purpose vehicle, the Zimbabwe Asset Management Company to house the $700 million NPLs in the system. Zamco will work with registered asset management firms to mobilise resources offshore to acquire NPLs to plug holes in banks’ balance sheets.
“We have looked at the market in terms of characteristics of what is happening. There are serial defaulters who you find common in most institutions who just don’t pay,” said Mataruka.
“We have looked at banks that actually failed before and you also find that one area that needs to be strengthened among banks is the credit underwriting standards.
“Some information that is critical is not captured and when it comes to foreclosure you find out that certain key documents which were supposed to be signed by the client were never signed and it becomes difficult to foreclose and people walk free.”
He called for the setting up of specialised commercial courts to speed up the process of winding up defunct financial institutions to ensure that depositors are not prejudiced.
“We have banks that were closed two years ago and which were then supposed to go through provisional liquidation and to date the final order is still to be granted yet there are depositors out there whose money is still locked in those institutions. I think there is need for the commercial courts and the judges to be sensitive to these issues.”
COMMENTS
ZANU economics. Give out loans to deadbeats who you know will not repay and then whine about bad loans. Great skills guys.
Tough times ahead
No Gono printing zim$ to bale out banks. Hard currency is a very different thing. Disaster looms
A manufactured hostile environment. The issue of NPL affects individuals, SME’S, Medium sized firms, Large Firms, Corporates, Listed Firms, Parastatals and Government. if in our wisdom we are to conclude that all these people are incompetent deadbeats then we should shut the whole place down.
Americans were not being stupid to bailout strategic industries after the global financial meltdown. That is smart economics not the shrieks of shalockian economists out to destroy gains of government empowerment programs.
At this juncture we need to make smart economic decisions guided by our political objectives and interests. And totally ignore those who want us to believe that we are all incompetent deadbeats. This is what “we will make your economy scream” means. This is a manufactured problem and the economy is “screaming “!
Well that’s another record for Zimbabwe to be proud of, highest inflation rate, highest debt ratio highest loan default rate. But chinamasa wants more loans. Collect you debt. Pay your debt to your lenders but readers can see that in Zimbabwe everything was freed in the liberation , free farms , free jobs why work when you can steal, free money from the banks , free car just steal one, this is in terms of zanupf freedom, the problem all the freedom has now run out and everyone is going to have to work for the new masters the Chinese or face destitution. So much for jobs and freedom . As they said one man one vote in the 1970,s but votes don’t buy food, votes don’t start agriculture and votes don’t bring investment. But I am sure everyone is happy in Zimbabwe cos they have freedom!
What does he expect? I wonder! Change the government and ‘viola’ things will begin to change!
Exactly what the Afghans, Iraqis, Liberians, Libyans were told. “change your government and “viola” things will begin to change” Now they all live in stable thriving democracies??? Sell me policies and not personalities.
The irony is that Zimbabwe as a country has taken out non-performing loans with the IMF etc. It is a serial defaulter.
Why would individuals not follow the example of their government ?