Oliver Kazunga, Senior Business Reporter
THE Zimbabwe Asset Management Company (Zamco) has set a target of resolving $140 million annually of Non-Performing Loans from the $1,4 billion it absorbed as bad debts.
Zamco is a special purpose vehicle under the purview of the Reserve Bank of Zimbabwe (RBZ) created in 2014 to mop up bad debts acquired from local financial institutions.
The asset management firm has so far resolved $420 million of the bad debts it mopped-up. Speaking by telephone from Harare, Zamco chief executive officer
Dr Cosmas Kanhai said they were working on annual targets to ensure the loans are resolved two years before 2025 so that they will be time to foreclose on collateral.
“We started the debt resolution exercise in 2018 and we have so far resolved above $420 million of the $1,4 billion NPLs that we absorbed from the banks.
“Remember, Zamco was created to run for 10 years, from 2015 to 2025 to take over the NPLs. We have finished absorbing the loans,” he said.
Dr Kanhai said Zamco was now undertaking the debt resolution, which exercise began in 2018.
“Since we started debt resolution, we have resolved $420 million. Our target is to resolve at least $140 million per year of the NPLs that we acquired,” he said.
Last year, the asset management firm resolved more than $180 million against an annual target of $140 million and this was largely because of inflationary pressures, which saw some of the debtors disposing of their properties at higher values to pay off their debts.
Companies whose debts were taken over by Zamco include Hwange Colliery Company Limited, RioZim, Cairns Foods Limited and Cottco.
The asset management company was mandated by the Central Bank to acquire the NPLs from banks to clean the financial institutions’ balance sheets so that they continue lending to productive sectors.
At the climax of NPLs in the banking sector, the ratio of bad debts averaged 20 percent against the standard global threshold of five percent. It is significant for banks to keep NPLs at lowest levels in order for the financial institutions to lend profitably.
The RBZ has noted that in the past banks had become increasingly risk averse due to the high NPLs on their balance sheets and had reduced on fresh loans, which was again deemed inimical to Government’s efforts to grow the economy.
The asset management firm is using various options for resolution of the NPLs including debt-to-equity swaps, loan-asset swaps, debt restructuring or where turnaround is not viable, liquidation. — @okazunga