AGRICULTURAL Bank of Zimbabwe (Agribank), which last year disbursed $159 trillion to farmers, will not pursue litigation against defaulting borrowers but will instead persuade loan recipients to make repayments, a senior official revealed this week.<
“Agribank is a development bank and by virtue of our mandate we cannot take legal action,” said Bernard Gadzikwa, the bank’s head of marketing.
He said instead they were going to use moral suasion and also engage politicians to educate farmers in their respective constituencies.
Gadzikwa said no legal action would be taken against even those farmers who deliberately defaulted on loans repayments. These would simply become ineligible for fresh loans by the bank, he said.
“We are also recruiting debt recovery people and buying cars to go around and try to recover the money,” he said.
Gadzikwa added that the bank does not ask for collateral from the farmers considering their nature and that is why they hardly ever take legal action.
He said they have three classes of farmers who include communal under A1.
“Most of the defaulters are on the lower end,” he said.
Agribank is a wholly government-owned financial institution tailor-made for farmers. Most of the bank’s loan recipients are widely believed to be top government and ruling party chefs and their cronies, the bulk of them beneficiaries of the government’s chaotic land redistribution exercise.
Agribank’s operations have been dogged by poor loan repayment, with the bank’s bad and doubtful debts increasing to $401 billion in the year ended December 31, 2005, and ultimately weakening the bank’s capital adequacy position.
The agro-financier’s bad debts increased from a previous year’s figure of only $41 billion while its capital adequacy ratio deteriorated to 9% from 12% in 2004.