Credit registry to tame NPLs

Senior Business Reporter
THE Reserve Bank of Zimbabwe will by mid next year finalise the setting up of a credit registry as part of efforts by the government to manage non-performing loans (NPLs) at acceptable levels.

Through the Zimbabwe Asset Management Company (ZAMCO), the central bank has managed to buy more than $256.4 million worth of eligible NPLs.

This has resulted in the ratio of NPLs to total loans declining from a peak of 20.45 percent in June 2014 to 14.27 percent as at the end of September.

Announcing the 2016 national budget last week, Finance and Economic Development Minister Patrick Chinamasa said amendments to the Banking Act provided for provisions to the establishment of a credit registry.

“The Reserve Bank will finalise the credit registry in 2016 so that all borrowers are vetted for credit worthiness for purposes of managing non-performing loans at acceptable levels by June 2016,” he said.

He added that the RBZ was also working towards establishing a collateral registry to facilitate registration and administration of collateral security, including movable assets.

Already, he said, the apex bank has sent bids for tender for the firms that have been identified to supply the credit reference software.

“Amendments to the Banking Act have also been made to allow for the licencing of private credit reference bureaus and the establishment of the central registry by the central bank. The Banking Act amendments for the establishment of the credit registry are already going through Parliament,” said Minister Chinamasa.

He said a credit reference system that houses an effective credit information database will help in limiting escalation of non-performing loans and bank failures arising from credit risk exposures.

This, he said, would maximise opportunities for the credit provision market by removing information asymmetry.

In addition, it is anticipated that this will increase financial innovation as more products will be made available on the market.

According to data from RBZ, NPLs by category of borrower as at September 30, 2015, for example, for individuals, manufacturing, agriculture, and commercial, stood at 12,48 percent, 13,48 percent, 17,92 percent, and 11,75 percent respectively.

Zamco has presently been buying qualifying NPLs from banking institutions thereby cleaning the banks’ balance sheets and resuscitating industry and commerce.

It is also hoped that the acquisition of NPLs would facilitate the resuscitation of companies such as Cottco, RioZim, Cairns Foods, Hwange Colliery Company Limited, Border Timbers, and Cold Storage Company.