Published: 22 June 2015

Zimbabwe Asset Management Company (Zamco) - a government's special purpose vehicle to house non-performing loans (NPLs) - is finalising modalities to clean up local banks' balance sheets, a central bank official said.

Kupukile Mlambo, Reserve Bank of Zimbabwe (RBZ) deputy governor, told delegates at the ongoing African Rural Agricultural Credit Association (Afraca), Regional Rural and Agricultural Finance Conference on Wednesday that the clean-up exercise would enable financial institutions to fund small scale farmers and the informal sector.

"We have so far managed to reduce NLPs to below 15 percent from over 20 percent recorded last year, we want to ensure that our banks operate to full capacity as they have done in Nigeria," Mlambo said.

This comes as Zamco, which was created to ease the impact of NPLs in the financial services sector and ease the liquidity crisis in the country, is also looking for a foreign investor.

The company established to house the countries over $700 million NPLs became operation early this year when veteran broker, Bart Mswaka, was appointed board chairman.

Zamco has to date drafted operational guidelines and manuals, and is in the process of defining a corporate governance strategy.

Mlambo said RBZ had also set up a credit registry and was in the process of making plans for the licensing of private credit bureaus.

"Credit information-sharing is a critical component of economic empowerment. In order for the financial services sector to be able to increase access to affordable finance while managing risk, the visibility that credit information-sharing provides is essential," added the central banker.

Mlambo also told the conference that banks had to give farmers first preference in terms of loan disbursements due to the low risk levels involved in farming.

"If drought does not strike, you are almost guaranteed as a financial institution that you will get full service of your loan so at the end of the day it makes business sense to go this route," he said.

This comes as the Farmers' Association of Community Self-Help Investment Groups – an organisation that caters for the needs of smallholder farmers – is also set to introduce a warehouse receipting system through which farmers deposit produce and use a receipt to obtain financing from banks.
- dailynews

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