ZAMCO acquires $242m bad loans

The Zimbabwe Asset Management Company has to date acquired $242 million worth of non-performing loans, the Reserve Bank has said.

Central bank Governor Dr John Mangudya said in an interview that the apex bank subsidiary has registered satisfactory progress in clearing NPLs. "ZAMCO has assumed about $242 million worth of non-performing loans and we are quite happy about what they have done," he said, adding this has reduced the rate of NPLs to about 13 percent.

ZAMCO is a special purpose vehicle formed by the central bank to undertake cleansing of the banking sector by taking over secured bad loans. It is believed that the process will free up funds, with NPLs estimated at $577 million, from banks into productive sectors of the economy.

The RBZ had noted with concern that NPLs, which reached a peak of 18 percent in September 2014, had caused banks to scale down on new loans. "It (ZAMCO) has reduced non-performing loans because we are doing two things; we are restructuring those businesses with good cash flows.

"We are also taking assets that are well secured. At the end of the day it reduces the overhang in terms of non-performing loans," he said. The initiative has helped banks to clean up their balance sheets while companies have benefited because they are getting more time to repay.

Apart from getting longer periods to pay for the NPLs, beneficiary entities will access fresh bank loans at rates of between 6 and 10 percent over the 10-year period that ZAMCO will be in existence. ZAMCO acting chief executive Dr Cosmas Kanhai said in September this year that banks were sitting on about $577 million worth of NPLs.

To fund acquisition of the bad loans, Dr Kanhai said ZAMCO would use a combination of sources including issuance of Treasury Bills. This would help improve liquidity in banks as the TBs can be used as security for liquidity support and are accepted for capital adequacy.

The PTA Bank had, as of September 2015, provided funding support to the tune of $45 million to help with efforts to clear the NPLs. The RBZ unit will explore opportunities available to it through the restructuring of acquired bad loans and conversion of the debts into equity.

ZAMCO will be empowered to participate in the scheme arrangements for companies whose NPLs it acquires. In the event a company cannot be restructured, ZAMCO will sell the NPLs and security.