LOCAL banks have hived off nearly US$200 million in non-performing loans to the Zimbabwe Asset Management Company (Zamco) during the first nine months of the year as individuals and companies remain trapped in debt, it has been established.
By Hazel Ndebele
Zamco is a special purpose vehicle created in 2014 by the Reserve Bank of Zimbabwe (RBZ) to buy NPLs from banks to clean their balance sheets. NPLs had reached almost US$800 million. An NPL is when payments of interest and principal debt are overdue by at least 90 days.
High interest rates and an underperforming economy have resulted in NPLs trending upwards with many banks transferring the bad loans to Zamco.
Official figures show that the total stock of NPLs absorbed by Zamco as at September 31 stood at US$539,91 million, up from US$353,58 million as at December 31, 2015. This translates to US$186 million absorbed as at September.
The agricultural sector followed by the financial services sector and mining constituted the bulk of the NPLs which had reached US$800 million in 2014 when Zamco was formed.
According to Zamco’s first annual report seen by the Zimbabwe Independent, sectoral distribution of the bad loans was concentrated in agriculture (25%), financial services (23%), mining (16%) and manufacturing (15%) sectors.
The distribution sector had 7% of NPLs, transport 6%, services 5% and the construction sector had the lowest at 2%.
The report further showed that as at December 31, 2015 the NPLs were acquired using 87% of Treasury Bills (TBs) and 13% of private funding. The TBs attracted a coupon of 5% per annum payable semi-annually.
“The bulk of NPL acquisitions were done using long-dated TBs with maturities of 12 years and 13 years. The acquisitions that were done by Zamco have helped in the reduction of the NPL ratio in the banking sector,” reads the report. “After peaking at 20,45% as at September 30 2014, the NPL ratio has been progressive on a downward trend to a level of 12,17% as at December 31 2015.”
Zamco was given TBs worth US$500 million by government.
“The government through RBZ has committed to the operations of Zamco by pledging to issue Treasury Bills with a face value of US$500 million for the purchase of non-performing loans.
“Zamco has utilised US$246 million of TBs allocation to date (as at December 31 2015),” the report shows.
The report pointed out that the provision in the Banking Amendment Bill (2015) which provides for the creation of Zamco for the purpose of purchasing NPLs is awaiting presidential assent before it becomes law.
Zamco recorded a surplus of US$478 788 for the year ended December 31 and as of that date its total assets were US$352 148 while total liabilities amounted to US$351 445.