ZB Financial Holdings has increased its focus on guarantee programmes for loan growth targeting the construction industry with over US$40 million worth of guarantees having been funded in the FY2017.
By Melody Chikono
This comes as the economy opens up, paving way for areas that have not been accessible for guarantees before.
Speaking on the sidelines of an analyst briefing last week, ZB chief executive Ron Mutandagayi told businessdigest that the opening up of the economy will see an increasing demand for bid bonds which the bank is willing to fund.
A bid bond is issued as part of a supply bidding process by the contractor to the project owner, to provide guarantee that the winning bidder will undertake the contract under the terms at which they bid.
“Because of the shift of the economy due to the new dispensation, areas in which guarantees are required have not been performing well.
“But now with the economy opening up, construction is going to increase and there is going to be need for bid bonds. We are happy to be funding those bid bonds. The guarantees that are required when you import stuff, guarantees required by Zimra (Zimbabwe Revenue Authority) and so on. We are trying to expand in that area,” he said.
Mutandagayi said ZB sees increased demand in guarantees as construction and rehabilitation of infrastructure gain momentum.
“Guarantees are not funded income. You don’t have to raise a deposit to issue a guarantee. You can issue a guarantee on the back of your balance sheet.
Based on our numbers, we have issued over US$40 million worth of guarantees in the past year and we see the number increasing. As long as there is demand from the construction industry, we are quite happy to respond,” he said.
As at December 31 2017, ZB’s loan book stood at US$346 million.
Meanwhile, Mutandagayi said his bank has reached its limit of offloading bad loans to the Zimbabwe Asset Management Corporation (Zamco) with a total of US$23,49 million having been taken up by Zamco in FY2017 up from US$20,26 million in FY2016. The group’s non-performing loan ratio improved to 16% in FY17 from 23% in FY 2016.
During FY17 Zamco provided credit relief to the group with TBs worth US$3,2 million, bringing the cumulative rescue package to US$23,5 million.
The cured assets in FY17 were largely in the agricultural sector (57%) and manufacturing sector (25%).
“We have offloaded as much as we can to Zamco. Zamco has a number of conditions when they assume loans which include security, assurance that loan can be recovered, a good business plan. We have gone through our loan book and we are quite happy that anything that could be taken up by Zamco has been taken,” Mutandagayi said. He said the bank was maintaining a cautious approach to private sector credit expansion.
Zamco stopped non-performing loan acquisition in Q1 2017 and as at December 31 2017, it had acquired non-performing loans amounting to US$987 million.