THE Zimbabwe Asset Management Company has since its establishment absorbed $1 billion Non-Performing Loans (NPLs) at banks for various companies to help the businesses turnaround.

In 2014, the Reserve Bank of Zimbabwe (RBZ) created the Zimbabwe Asset Management Company (Zamco) to mop up NPLs after an insidious culture of dishonouring credit obligations took root, choking banking institutions from providing fresh loans to the market.

Against this background, Zamco has since inception been assuming mortgage bonds, non-insider loans and NPLs for companies in good stead.

Speaking by telephone from Harare yesterday, Zamco chief executive officer Dr Cosmas Kanhai said:

“Since inception, we have absorbed $997 million of NPLs. We are taking over the NPLs from banks. For instance if a company owes a bank and it’s approved that the loan is an NPL, that’s what we take over.

“And if a company owes Zesa in electricity bills that’s not an NPL and we don’t take it over. Zamco was formed by the Central Bank specifically to assist banks with NPLs, so it’s only loans that are at banks that we take over.”

The asset management firm mobilises Treasury Bills for banks to get liquidity and has been converting NPLs into performing loans via debt restructuring, among other strategies.

Dr Kanhai said Zamco takes over the NPLs and restructures the loans to facilitate effective turnaround strategies taking into account that some firms had the loans advanced to them at interest rates ranging between 20 and 30 percent per annum.

He said as part of the NPLs restructuring, Zamco reduces the loans’ interest rates to between six and 10 percent per annum.

“That (reduction of interest rates) alone also helps the company to reduce its financial cost. As Zamco, we also increase the repayment period and that helps the company from a cash flow perspective as they will be paying less than they would if the repayment period was shorter,” said the Zamco boss.

“Taking over NPLs has benefited both banks and companies as banks will unlock funds while companies get long repayment periods and more time for turnaround.

“With time and depending on the business model, we can also give the companies a grace period to say maybe for six months they don’t pay interest and capital repayment and that in itself has helped a lot of companies in terms of turning around,” he said.

Asked about the names and number of Bulawayo companies whose NPLs have been absorbed by Zamco, Dr Kanhai said:

“Normally we don’t take those (NPLs) over as per location, we take them from the banks and it’s not automatic that we take them over.

“If your bank does not offer us to take over the NPLs, we don’t take over because this is done on a willing buyer-willing seller basis and thus we don’t say we aim to take over so much from a specific region.”

Economic analysts have pointed out that NPLs were a major challenge for commercial banks as the loans represented blocked income as well as reducing liquidity levels.

Dr Kanhai said Zamco requests banks to give them the NPLs list before the asset management firm does the due diligence to mop up the loans.

“We also have instances where companies want their NPLs to be taken over and Zamco normally refers them to their respective banks for negotiations so that the bank initiates the procedure. If the bank feels it’s not an NPL and the client can still pay, the bank may refuse the takeover of the loan by Zamco,” he said.

- Chronicle