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Dr John Mangudya

Happiness Zengeni recently in Sandton, South Africa
THE Zimbabwe Asset Management Company has taken over $60 million worth of non-performing loans secured against recoverable assets, Reserve Bank of Zimbabwe Governor Dr John Mangudya has said.The central bank chief said they were now working on completing the process of validating information from banks to find the best way of purchasing the outstanding non-performing loans saddling the banks.

“ZAMCO is purchasing non performing loans supported by assets to avoid moral hazard,” said Dr Mangudya.  “We’re quite happy with the process. NPLs don’t go away by themselves. As long as we don’t do anything, they keep growing,” he added.

He made the remarks in an interview after the Zimbabwe Trade and Investment Executive breakfast meeting hosted by Zimpapers in Sandton, South Africa, last Friday.

“ZAMCO has now taken almost $60 million in non performing loans,” the RBZ chief said.

Dr Mangudya said the asset management company had started on a good note after managing to purchase non performing loans worth $5 million a few weeks after its formation.

The central bank chief said the formation of the asset management company was critical considering that non performing loans keep increasing due to interest charged on bad loans.

He added that ZAMCO would not take unsecured non-performing loans, as it was not prudent for any banking institution to extend loans to anyone without providing security.

Dr Mangudya recently said that NPLs had grown from an average of 18 percent in July this year to 20 percent by September, locking up over $800 million in debt. Banks have since reacted by reducing loans.

The central bank governor believes that taking away the non performing loans from the balance sheet of banks would unlock the liquidity required to drive activity in various productive sectors of the economy.

Companies in Zimbabwe have been struggling to repay loans due to the difficult economic conditions. Industrial capacity utilisation is low, as companies continue to struggle to secure funding to raise production.

The situation has been made worse by the fact that banks are charging high interest rates, taking advantage of the liquidity crunch, which has also compromised the competitiveness of the rest of local industry.

Meanwhile, Dr Mangudya said that the banks facing serious financial problems would be given time to secure investment.

“Our wish is to ensure an active and stable financial services sector,” Dr Mangudya said.