Zamco absorbs $100m bad loans

RBZ Governor John Mangudya

RBZ Governor John Mangudya

Business Reporter
THE Zimbabwe Asset Management Company (Zamco) has absorbed about $100 million of the $750 million non-performing loans in the banking sector.

Zamco is an independent asset management company established by the Reserve Bank of Zimbabwe (RBZ) last year to resolve the scourge of non-performing loans (NPLs) by buying out from the commercial banks their collaterised loan books.

The entity started operating early this year.

Finance and Economic Development Minister Patrick Chinamasa said the formation of Zamco did not mean that the Central Bank would take over any loans that were recklessly given without due diligence.

“The main objective of this company is to buy out from the commercial banks collaterised loan books of the commercial institutions.

“The Reserve Bank, under this company will not take over any loans which were recklessly given without appropriate security,” he told Parliament on Wednesday.

“Already, this company (Zamco), in a very short period of time, two months, has already taken nearly $100 million from the loan book of financial institutions. Work is underway to proceed with that arrangement.”

The minister said the stock of non-performing loans across all the banking institutions was around $750 million.

He said the asset management firm was buying out NPLs with a view to clean up the balance sheets of commercial banks so that they are put in a state where they can confidently resume trading and lending.

In the 2015 monetary policy statement, RBZ governor, John Mangudya said the central bank was committed to ensuring that Zamco’s systems and processes were in line with international best practice.

In that regard, the assent management firm has received technical assistance from the International Monetary Fund.

The RBZ chief has said Zamco’s strategy for funding the acquisition of NPLs will comprise a number of options including government funding through long-term debt instruments that were approved in the 2015 national budget statement.

Mangudya also said NPLs acquisition approach was meant to prevent a moral hazard in the banking sector.

“This will also avoid Zamco being seen as pardoning past bad lending decisions. As part of the preparatory work the Reserve Bank in conjunction with Zamco carried out a market-wide exercise in December 2014 to ascertain the level of NPLs that meet the eligibility criteria,” he said.

Pin It