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Zimbabwe Creates Company to Purchase Bad Debt From Banks

The Reserve Bank of Zimbabwe created a company that will buy non-performing debt from banks.

The Zimbabwe Asset Management Corp. will purchase the loans under commercial terms, and assign collateral and all other rights, the central bank said in its monetary policy statement yesterday.

The company will seek “to clean up and strengthen banks’ balance sheets and provide them with the liquidity to fund valuable projects for the economy to rebound and to mitigate loss of confidence,” the central bank said.

Non-performing loans at Zimbabwean banks swelled to 18.5 percent of total loans, or $705 million, in June from 1.6 percent in 2009, the central bank said. The high level of bad debt is the key threat to the country’s banking industry, Harare-based IH Securities said in May.

Zamco, as the company will be known, will finance the purchases through “a combination of non-funded lines of credit, new inflows, long-term bonds and Treasury bills,” the central bank said.

Nigeria set up a similar company, the Asset Management Corp., in 2010 to absorb bad debts of the West African nation’s banks and help save the industry when loans to speculators and fuel importers soared following the 2008 global financial crisis. Amcon took over three banks in 2011 after the regulator deemed them unable to meet banking requirements.

Zamco, which will be supervised by the Reserve Bank of Zimbabwe, bought $45 million worth of bad debt from three banks since Aug. 15, the central bank said.

There are 19 banks operating in Zimbabwe, including units of London-based Standard Chartered Plc and Barclays Plc, as well as South Africa’s Standard Bank Group Ltd. (SBK)

To contact the reporters on this story: Rene Vollgraaff in Johannesburg at rvollgraaff@bloomberg.net; Godfrey Marawanyika in Harare at gmarawanyika@bloomberg.net

To contact the editors responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net Andres R. Martinez, Dulue Mbachu, Sarah McGregor, Gordon Bell

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