Banks put faith in individuals

non-performing loans have been on the rise, increasing the vulnerabilities of the local banking sector.
Said the AfDB: “One trend that has emerged is that individuals are able to repay the loans as opposed to companies in the productive sectors. This has tended to boost loan advances to individuals by banks as opposed to corporates.”
Figures from the Reserve Bank of Zimbabwe on the distribution of bank loans and advances to the private sector as at mid-year shows a concentration in agriculture (22,4 percent), distribution (19,9 percent), manufacturing (18,8 percent), individuals (12,2 percent), services (11,3 percent), mining (7,3 percent) and others (8,1 percent).
An analysis of the loans and advances to the private sector shows that the lion’s share went to the critical sector of agriculture. However, it is also important to note that lending to the distribution industry was also high.
This is partly due to the fact that the sector has a short cash cycle, which implies a short loan repayment period.
The local financial services sector has shown increasing reluctance to offer long-term loans.
The AfDB says this is not conducive for economic recovery.
“These developments suggest that lending in the economy is more skewed towards short-term economic activities, as opposed to long-term activities, which is not favourable in a recovering economy.”