Banks adopt cau­tious lend­ing

Chronicle (Zimbabwe) - - Business Chronicle - Oliver Kazunga

THE bank­ing in­dus­try has adopted a cau­tious lend­ing ap­proach re­sult­ing in loans and ad­vances to the pri­vate sec­tor de­clin­ing to $3.7 bil­lion in the first six months of the year.

Fi­nance and Eco­nomic De­vel­op­ment Min­is­ter Pa­trick Chi­na­masa re­vealed in the mid-term fis­cal pol­icy that the cau­tious lend­ing ap­proach was a di­rect re­sponse to the dis­posal of Non-Per­form­ing Loans (NPLs) and the pre­vail­ing op­er­at­ing eco­nomic pres­sures.

“Loans ad­vances de­clined from $4 bil­lion as at 30 June 2015 to $3.7 bil­lion as at 30 June 2016, largely as a re­sult of cau­tious lend­ing ap­proach by bank­ing in­sti­tu­tions, in re­sponse to the op­er­at­ing en­vi­ron­ment and dis­posal of non-per­form­ing loans to Zim­babwe As­set Man­age­ment Com­pany (ZAMCO),” he said.

ZAMCO is a spe­cial pur­pose ve­hi­cle es­tab­lished by the Re­serve Bank of Zim­babwe in 2014 be­fore it started op­er­at­ing last year to buy out NPLs from com­mer­cial banks their col­la­terised loan book.

“The liq­uid­ity chal­lenges I have al­luded to have also af­fected the pat­tern of credit ex­ten­sion. Con­se­quently, loans to de­posit ra­tio was on the de­cline, with banks sit­ting on rel­a­tively more fund­ing than what they have been pre­vi­ously lend­ing,” said Min­is­ter Chi­na­masa.

Since 2013, the min­is­ter said, lend­ing to in­di­vid­u­als has pre­dom­i­nated over­all lend­ing con­tribut­ing the high­est per­cent­age at 29 per­cent.

This was not all con­sump­tive as it in­cluded loans for agri­cul­tural and other pro­duc­tive pur­poses.

How­ever, fears over job se­cu­rity fol­low­ing the spate of re­trench­ments since July 2015 have also seen some banks tread­ing care­fully in grant­ing in­di­vid­ual loans. The banks’ short-term li­a­bil­ity struc­tures con­tinue to con­strain bank­ing in­sti­tu­tions ca­pac­ity for en­hanced fi­nan­cial sup­port to con­struc­tion, com­mu­ni­ca­tion and min­ing sec­tors, which re­quire medium to longterm fund­ing.

“An av­er­age pru­den­tial liq­uid­ity ra­tio of 49 per­cent as at end March 2016 was above the stip­u­lated min­i­mum reg­u­la­tory re­quire­ment of 30 per­cent.

“Seven­teen out of the 18 op­er­at­ing banks were com­pli­ant with the pru­den­tial liq­uid­ity ra­tio as at end March 2016,” he said.

The min­is­ter added that the high av­er­age pru­den­tial liq­uid­ity ra­tio was partly at­trib­uted to a cau­tious ap­proach to lend­ing by some bank­ing in­sti­tu­tions in a bid to con­tain NPLs and to en­hance liq­uid­ity risk man­age­ment.

“Bank­ing in­sti­tu­tions with tem­po­rary liq­uid­ity chal­lenges can ac­cess the African Ex­port Im­port Bank Trade Debt Backed Se­cu­ri­ties (AFTRADES) fa­cil­ity,” he said.

The AFTRADES fa­cil­ity was set up to lower the risk of bor­row­ing among banks by trans­fer­ring it to an ex­ter­nal fi­nan­cial in­sti­tu­tion and thus en­cour­ag­ing con­fi­dence in lend­ing among banks, thereby sta­bil­is­ing the fi­nan­cial sec­tor. —-@okazunga

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