Govt blamed for loan defaults

HARARE - Financial services group, CBZ Holdings has blamed government’s sloppy vetting exercise for most defaults in the disbursement of the Youth Development Fund.

Never Nyemudzo, CBZ Holdings chief executive last week told a parliamentary committee on Youth and Indigenisation that although the bank was tasked with administering the fund, it does not have control over it.

“The beneficiaries of the Special Fund are handpicked and vetted by the ministry so the bank does not have a say over that fund.

“The bank only controls the ordinary fund, where it takes a 20 percent credit risk and the ministry takes 80 percent, while the ministry has 100 percent credit risk with the special fund,” Nyemudzo said.

Under the Special Fund $945 000 has been disbursed with a balance of $1,4 million outstanding. However, under the Ordinary Fund, $1,3m was disbursed leaving a $1m balance.

CBZ disbursed $2,3m under the Special Fund and the Ordinary Fund.

Nyemudzo noted that the major chunk of loan defaulters were in the Special Fund cluster.

“Most defaulters are in the Special Fund because of the differing vetting techniques compared to the Ordinary Fund.

“When one defaults regardless of the fund, the bank will do all it can to collect from the defaulter, if all fails, the ministry will have to liquidate the position through its fund,” said Peter Zimunya CBZ managing director.

Zimunya said the normal level of defaulting was five percent, and at 45 percent, the defaulting rate the fund had was “very bad and unsustainable.”

“Most of the defaults are in the manufacturing, poultry and cross border sectors.

“This is because of poor management a direct result of lack of capacity building on the part of the beneficiaries,” said Zimunya.

This comes as fellow fund administrator Cabs also told the same committee the bank had halted disbursements of funds under Old Mutual’s $10m Kurera-Ukondla Youth Empowerment Fund due to high default ratios.

As of June 20, 2014, 78 percent of the loans were nonperforming. Of the $4,9m disbursed, about $4,2m is in a nonperforming arrear-position, under the Cabs fund.

The Youth Development Fund was launched on October 6, 2006 as a revolving fund.

Disbursements also commenced in October 2006.

The loans are being provided at rates of between eight and 10 percent per annum.

The average loan size at Cabs was around $1 438. CBZ loaned the youths $2 000 at an interest rate of 10 percent per annum.

The total fund administered from 2009 to date is $2 682 777.

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