adminLivingstone Marufu—
THE credit registry system, mooted by the Reserve Bank of Zimbabwe (RBZ) to arrest a surge in non-performing loans (NPL), is currently at the trial stage.
The system, which is expected to improve credit risk management in the country’s financial services sector, will help banks to collect information from creditors and available public sources on a borrower’s credit history so that defaulters are blocked from multiple borrowing.
Market watchers say the absence of a credit registry in Zimbabwe has given birth to serial borrowers who hop from one bank to other but dishonour their obligations to repay the loans.
RBZ senior divisional chief, economic research and policy enhancement, Mr Simon Nyarota told The Sunday Mail Business recently that the credit system would go a long way in reducing NPLs.
“The (credit reference) system is currently at testing stage. It’s expected to improve the performance of the financial sector and stimulate economic development by making lending and borrowing easier, faster and ultimately cheaper.
“Further, borrowers can use their positive credit history as ‘collateral’ to access loans at better rates and seek more competitive terms from different lending institutions.
“The new system promotes and supports a high level of trust between lenders and borrowers — resulting in an increased volume of credit in the economy,” said Mr Nyarota.
The timely and accurate information on borrowers’ debt profiles and repayment history enables banks to make informed lending decisions so that they remain viable.
Experts posit that the system would enhance the verification process for borrowers, enabling bankers to assess credit risk and reduce the level of NPLs in the banking sector.
NPLs peaked at 20,45 percent last year but as at June 30, 2016, the ratio averaged 10,05 percent.
An NPL is the sum of borrowed money upon which the debtor has not scheduled payments for at least 90 days.
The RBZ is targeting an NPL ration of 5 percent by year end. In October 2015, the RBZ ordered banks to charge interest rates of between 8 percent and 18 percent.
Creditinfo, a Czech Republic credit checker, was in April 2016 awarded the tender to set up the RBZ’s credit bureau system at a cost of US$1, 8 million.
Local banks have resorted to legal processes to recover bad loans. The banking sector currently uses the Financial Clearing Bureau (FCB), which players in the sector say only keeps a register of defaulters and judgments.
With the CRB system coming on board, the RBZ will also establish an internal unit that will licence and monitor private credit bureaus.
Meanwhile, CBZ Holdings, Zimbabwe’s biggest lender with over US$1 billion in deposits, registered a 3,8 percent increase in bad loans due to the poor performance of the country’s agriculture sector last year.
NPLs soared to US$78,9 million during the first half from US$76,1 million recorded all of last year.
In its latest earnings release, the bank blamed the rise in NPLs on the below par performance in agriculture, which saw the number of customers in agriculture that failed to repay loans rising by more than 93 percent in the last six months.
As a result of high interest rates and a general culture of not repaying loans, banks are burdened by US$528,4 million worth of NPLs, as at June 30, 2016.
The RBZ has since created a special purpose vehicle, the Zimbabwe Asset Management Corporation (Zamco), to hive off NPLs from banks so as to free their balance sheets.
As at November 30, 2016, Zamco had acquired NPLs totalling US$543 million.
Online Reporter