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‘Inconsistent policies hamper banking sector’

HIGH country risk and inconsistent government policies inhibit financial institutions from securing lines of credit on the international market, a local banker has said.


Following the end of the inclusive government and Zanu PF’s electoral victory in July last year, many potential investors have put their investment capital on hold citing uncertainty over policies and the business environment.

NMBZ Holdings group chief executive, James Mushore said the issue of country risk continued to slow the bank down.

“It’s an uphill task negotiating lines of credit although we have secured US$57, 4 million credit lines since 2009,” he said.

“With new capital of US$14, 8 million raised from three strategic foreign investors, this has helped in terms of improving the shareholder profile and it will be easier to get credit lines when we go out,” Mushore said.

He said the bank would focus on raising US$100 million by 2020 and pay particular attention to managing Non-Performing Loans (NPLs).

He said one of the bank’s key objectives would be to extend credit lines at reasonable prices to its clients.

The bank recorded a US$3,3 million loss largely as a result of NPLs with the manufacturing sector accounting for 36% of NPLs, while distribution accounted for 21%.

“We gave loans to the ‘nimble footed’ players in the distribution sector soon after dollarisation, and they bought products from neighbouring countries, sold them and made profits before paying back loans.

“When the ‘sleeping giants’ awoke, they brought in products at lower prices, thereby pushing out smaller players,” he said.

He said by December 31 2014, NPLs would be reduced to at least 15% through introducing business support and recovery structures.

The bank’s chief finance officer, Benson Ndachena said the US$3,3 million loss was attributed to increased impairments on loans and advances.

“Impairment losses increased due to write offs of irrecoverable loans,” said Ndachena.

Mushore said the bank would soon be venturing into mortgage lending while funding was being raised to cater for the housing deficit.

“We are looking at the bottom end of the market for this. We have limited funds left in this regard. Lines of credit for this are hard to find but it’s a great business once we put the structures in place,” he said.

He said the mortgage sector was a business with tax benefits, as building societies were exempted from taxation.

The central bank extended tax breaks on profits of banks’ that extend mortgage lending to the market.

“We can do mortgage business inside the bank without having to set up another structure,” he said.

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