Zimbabwe: Toxic Risk Disinfected From Banking Sector

Sep 22, 2020 | Herald - All Africa

The Zimbabwe Asset Management Company (ZAMCO), says it has managed to eliminate potentially hazardous systemic risk from the banking sector after taking over $1,1 billion worth of non-performing loans (NPLs), giving debt ridden firms a new slate to make a fresh start.

ZAMCO chief executive Cosmas Kanhai, said in an interview after it assumed bad debts, the NPLs rate among banks dropped from a peak of 20 percent to 5 percent, which is in line with the global trends.

Dr Kanhai said while ZAMCO's primary function was to clean up the banks' balance sheets to stem out the hazards associated with the bad loans, the lifting and restructuring of the NPLs gave firms that were struggling to repay latitude and time to get back on their feet. More than 65 percent of companies that had their bad loans assumed by ZAMCO from banks, had managed to pay up and were now in sound positions, Dr Kanhai pointed out.

In fact, Dr Kanhai said that ZAMCO was running ahead of schedule and could complete resolution of the NPLs much earlier than its gazetted 10 year lifespan. He said that the asset management firm will not exist in perpetuity and so will fold down after fulfilling its mission.

ZAMCO was established by the Reserve Bank of Zimbabwe (RBZ) in July 2014, as part of holistic measures to deal with the hazardous and systemic potential risk of rising (NPLs) in the banking sector.

The decision to form the debt assumption firm was in recognition that high NPLs invariably constrain banking institutions' credit intermediation capacity thus, acting as a drag on economic growth.

Dr Kanhai said that ZAMCO was formed with the specific mandate to take over bad debts and prevent problems that could constrain the intermediation of banks, which has a serious negative effect on the economy. Read more on All Africa

Source: All Africa