ZAMCO takes over $1.13 bln NPLs

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Tinashe Makichi

The Zimbabwe Asset Management Corporation (ZAMCO) has to date assumed non-performing loans amounting to $1,13 billion with efforts currently underway to make sure that all bad debts are cleared by 2025.

In an interview with Business Times, ZAMCO chief executive Cosmas Kanhai said the vehicle has a life span of 10 years and the target was to make sure that all the NPLs assumed are collected within the prescribed tenure.

In 2014, the Reserve Bank of Zimbabwe (RBZ) created ZAMCO, a special purpose vehicle (SPV) to mop up NPLs and free the balance sheets of banks after the default rate had reached 20,45 percent. There were fears that banks would cut back on lending at a time
companies were crying for funding.

Since its inception, ZAMCO has been assuming mortgage bonds, non-insider loans and NPLs for companies in good stead.

“To date we have managed to assume $1,13 billion worth of NPLs and we are now on the resolution stage and it is our target that  after 10 years  which is our lifespan we will have collected all the NPLs. In some cases where we see there are prospects of recovery, we will
restructure the loans and where there are no prospect, that is when we will look into means to collect the loans,” Kanhai said.

“We want to make sure that by 2025 we will have closed shop because as  you are aware we were formed not to exist forever, we have a certain lifespan.”

Kanhai however dismissed the notion in the market that ZAMCO was formed to cushion debts which could have been mainly accumulated by politicians. This comes after there had been reports that politicians were abusing the ZAMCO facility to clear their debts/loans.
He said ZAMCO was formed to save banks which were almost chocking because of the rising NPLs and the banks were the biggest beneficiaries of the formation of ZAMCO.  When ZAMCO was formed, the NPLs ratio had peaked to 20,45 percent in September 2014.

The NPL acquisitions that have been made to date by ZAMCO have contributed to the decline in NPLs ratio to 6,22  percent as at  June 30, 2018.

“On the NPLs mix; what we assumed are business loans and not individual loans in most cases. ZAMCO was formed to protect banks from collapsing because of NPLs,” Kanhai said.

“ZAMCO was not formed to cushion borrowers but to protect banks from closing and the best idea then was to come up with an SPV. Borrowers did not benefit from state funds but banks actually benefitted the most.”

He said ZAMCO has achieved its objective to “protect banks from closing and the general objective was on taking over loans and not looking at who is behind the loan”.