Zamco operational, probes NPLs

HARARE - The Zimbabwe Asset Management Company (Zamco) — a special purpose vehicle created by government to house banks’ Non-Performing Loans (NPLs) — is now operational and is assessing the extent of the “toxic” debts.

Following a surge in NPLs, estimated at around $700 million, the central bank established Zamco in a bid to exclude the bad loans from banks’ balance sheets.

Bart Mswaka, Zamco’s chairperson, yesterday told businessdaily that they were engaging banks to ascertain the exact level of the NPLs.

He, however, could not disclose the specific financial institutions.

“We are working closely with the banks because we obviously need to have a grasp of the NPLs.

The governor has said we have to look at what caused the NPLs,” Mswaka said, adding that they were also looking into the establishment of a Credit Reference Bureau.

“…we are addressing issues to do with the current situation and how best the NPLs can be overcome and absorbed,” he said.

The veteran stockbroker said the ultimate goal was to lower the NPLs rate to the prudential regional benchmark of five percent.

Zimbabwe’s banking sector NPLs escalated to an average 20 percent in October 2014 from 18 percent in June.

Mswaka, however, said further detail could be obtained from the central bank and Finance ministry.

Last year, Finance minister Patrick Chinamasa said government will this year focus on forming definite structures for Zamco.

“During 2015, focus will be on developing the features and structures for Zamco. This will include, designing of an appropriate legal and governance structure, developing an appropriate asset valuation and pricing strategy, which ensures assets are purchased from banks at fair value,” he said, as he presented the 2015 budget.

“Identifying a feasible and sustainable funding strategy, ideally relying on a combination of long-term domestic bonds and externally-sourced financing,” he added.

Chinamasa also highlighted that raising the needed capital to be used to cleanse NPLs on a commercial basis, against a bank’s financial assets, through a debt instrument of 10 to 15 years, was of key importance in the coming year.

“The result should be strengthened banks’ balance sheets, as they access liquidity to fund productive activities and help spur economic growth,” he said.

Currently, about $60 million has already gone through the special purpose vehicle, according to central bank governor John Mangudya.

According to Mangudya, the central bank is getting information from banks so that it can be entered into a database which will be used by Zamco to assess the loans.

 

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