Published: 08 April 2014

The Reserve Bank of Zimbabwe (RBZ) says efforts are being made to craft a law to deal with insider loans which have become a major of concern in the banking sector.

Speaking at SAPES Dialogue last week, central bank deputy governor Kupukile Mlambo said insider loans was such a serious issue, they would cause some banks to close.

"The issue of corporate governance is very crucial. Insider lending has caused serious problems that is why we have banned insider loans, they constitute most of the non-performing loans.

" . . . We have discovered that this was caused by dominating shareholders in banks but now we are setting ways to deal with them. We will put new regulations," Mlambo said.

He said that non-performing loans were increasing because it had become very difficult for banks to obtain information about borrowers.

University of Zimbabwe economics lecturer Ashok Chakravarti said a poor corporate governance framework resulted in bad business practices which can be hidden in things like insider loans.

"According to the World Bank, Zimbabwe remains at the bottom of investor friendly nations. This defeats any attempt to increase foreign direct investment.

"In as much as the image of the country remains bleak, a largely illiquid economy will persist. Zimbabwe's key indicators on corruption, governance, political stability and rule of law are severely unfavorable in comparison to neighboring economies," he warned.
- Zim Mail

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