Zimbabwe state asset manager takes up $480 million in bad debt

By MacDonald Dzirutwe

Zimbabwean state-owned asset management firm has taken up $480 million in bad loans from banks to help restore viability in the financial sector since its launch two years ago, its chief executive said on Thursday.

The Zimbabwe Asset Management Company (ZAMCO) was created by the central bank in August 2014 to take over non-performing loans (NPLs) from banks that had risen to $815 million and were restricting banks from providing new loans.

ZAMCO’s Chief Executive Cosmas Kanhai told an investment conference in the capital Harare that his company was only taking over loans largely secured by mortgage bonds.

Kanhai said ZAMCO was issuing Treasury Bills to the banks at a discount and would restructure the loans by reducing interest charges and extending the repayment period for debtors, who are mostly companies that borrowed from banks.

“So far … we have acquired NPLs of around $480 million as at 31 May,” said Kanhai.

The next step would be to create a market for NPLs where local and foreign investors can buy and sell the debt, he said.

Five local banks have closed since 2013 due to solvency and liquidity problems but the central bank says the financial sector is now safe and sound.

The central bank has directed banks to cut non-performing loans – the ratio of bad loans to total loans issued – to below 10 percent by end of June, from 10.81 percent in March, with the ratio being cut to 5 percent by the end of this year. Reuters