THE Zimbabwe Asset Management Company has invited financial institutions to submit a fresh round of applications for possible takeover of non-performing loans which are still on their books.
Banks were given until early this week to submit new applications for the takeover of bad loans by ZAMCO, a company established by the Reserve Bank of Zimbabwe to acquire, manage, restructure or dispose non-performing loans. During the first phase of the exercise, ZAMCO took over non-performing loans, which were in the top 100.
“As per our telecoms and pursuant to our letter to yourselves dated December 2015 requesting for submission of the list of the remaining eligible NPLs (outside top 100 across all banks) that banks intend to sell to ZAMCO, please fill in the attached template and return at the earliest convenience, latest by . . . Monday,” said ZAMCO in a letter to banks.
ZAMCO has to date acquired $242 million worth of NPLs. The process is expected to free up funds, with NPLs estimated at $577 million, from banks into productive sectors of the economy. The RBZ had noted with concern that NPLs, which reached a peak of 18 percent in September 2014, had caused banks to scale down on new loans.
At some point, banks had started scaling down on provision of loans to productive sectors of the economy and also tightened their lending regimes. This had the potential negative impact of further constraining efforts aimed at turning around the economy.
RBZ governor Dr John Mangudya said the central bank was happy with the progress made in ridding the banks of bad loans, which had seen the level of NPLs falling to 13 percent.
International best practice allows non-performing loans to a maximum of 5 percent of total bank loans, anything beyond that is regarded undesirable. ZAMCO is only acquiring secured loans with good collateral and a good chance of being restructured.
Dr Mangudya is on record emphasising the need to stem out bad loans by housing them under an SPV, which would seek ways to deal with the loans. These include restructuring the bad loans and assisting companies with potential to turnaround but saddled by NPLs to access fresh funding for operations.
ZAMCO has identified eight companies in which it will acquire non-performing loans. These are Cottco Holdings, RioZim, Cairns Foods, Border Timbers, Hwange Colliery Company Ltd, Astro Motors and Cold Storage Company.
Companies relieved of the debts, by getting longer period to repay, but with good cash flows get fresh funding at terms ranging from 6 percent to 10 percent.
ZAMCO said it would use a combination of strategies to fund acquisition of NPLs, including Government Treasury Bills and loans from foreign funders.