Harare - Ballooning non-performing loans in Zimbabwe are hobbling banks in the cash-strapped country, forcing the institution of stricter lending criteria including tight profiling of borrowers.
According to insiders, banks that have adopted strict lending measures in the country include Barclays Zimbabwe, MBCA Bank - owned by Nedbank - and Standard Bank-run Stanbic Bank. The three banks have recorded non-performing loans of below 5%.
But for other banks, such as those which are locally owned and BancABC, the Bob Diamond-owned Atlas Mara unit, non-performing loans have been problematic.
These banks are now tightening lending measures. The Zimbabwe Asset Management Company, created to house bad debt in Zimbabwe, has also improved the situation.
“Banks are struggling to recover money loaned out because of rising consumptive borrowing and cash difficulties in the country. People have been losing jobs and salaries are frequently delayed; this is making the whole loaning business difficult,” a banking sector manager told Fin24.
Atlas Mara on Thursday said it has made an after tax loss of US$6.7m across all its Africa operations. It attributed the loss in part to “credit provisions taken in Zimbabwe against specific corporate loans due to economic headwinds” experienced in the country.
Absence of credit bureau a problem
George Guvamatanga, managing director for Barclays Zimbabwe, has previously said the bank lends only to corporate clients of high repute and to the employees of these companies. The absence of a credit bureau in Zimbabwe has also made profiling of borrowers difficult.
“A deliberate policy of managing down lower quality, higher risk revenues coupled with additional credit provisions taken in Zimbabwe, with no recoveries from the non-performing loan portfolio in the quarter, were the principal drivers behind the loss,” Atlas Mara said.
It is however expecting that this “will be reversed over the remainder of the year, with good progress being made in the continued efforts to monetise some of the non-performing loans” from Zimbabwe.
The 2015 loan loss ratio for Barclays Zimbabwe was 1.2% up from 0.4% in the prior year period. It attributed the increase to the growth in its loan book and the basis of general provisions having been reviewed to reflect trends in the economy.
Net interest income for the year to end-2015 rose 18% to $16.6m, while after tax profits surged 41% to $6.6m.