Zimbabwe's Credit Bureau captures 97% loans

Published: 31 August 2017

RESERVE Bank of Zimbabwe (RBZ) governor, John Mangudya, last week revealed that the Credit Reference Bureau (CRB) has now captured information on about 97 percent of all loans, a move expected to improve credit risk management in the financial sector.

The CRB was set up last year by Czech credit checker, Creditinfo, at a cost of $1,8 million to assist banks with the assessment of borrowers in the economy.

It went live early this year to enhance the verification process of borrowers, enabling bankers to assess credit risk and reduce the level of non-performing loans (NPLs) in the banking sector.

It also allows lenders to determine how much and at what rates to lend.

The bureau would promote transparency in the economy as there would be greater sharing of information, making financial institutions aware of their customers' financial exposures.

"I can confirm that the CRB now has 97 percent coverage of all loans," said Mangudya.

He added: "The problem with us Zimbabweans is that we don't have a repaying culture. We need to repay the loans that we take. Most of the people have the ability to repay but they are not willing to repay. This is an attitude problem. In fact, its market indiscipline," said Mangudya.

CRB collects individual, corporate and other legal entities' credit data from a variety of sources.

This is consolidated into profiles available on request to subscribers, enhancing financial stability by promoting more robust risk management practices and reducing credit risk.

Credit would therefore be given to vetted individuals. Once risk is reduced, banks can lend at lower interest rates, fuelling growth-related economic activities.

The absence of a comprehensive credit reference environment in Zimbabwe had negatively impacted on the financial services sector, resulting in many banks battling with high NPLs.

NPLs had reached a peak of 20,45 percent in September 2014 but declined to 7,98 percent at the end of this year following acquisition on NPL portfolios by the Zimbabwe Asset Management Corporation (ZAMCO).

ZAMCO's acquisition of NPLs has allowed banking institutions to strengthen and leverage on their balance sheets to access fresh capital to fund productive sectors and spur economic growth.

Several banking institutions collapsed due to poorly performing loans.

The bulk of the failed institutions were accused of shareholder and management delinquency, with insider loans playing a key role in their insolvencies.

The country has experienced over 20 cases of bank failures since 2004 due to serious challenges that ranged from poor corporate governance practices, deep rooted risk management deficiencies and chronic liquidity problems.

There has been growing concern over the number of banks that have failed considering the key role that the financial sector plays in the development of the economy.

Apart from the banking public enduring tremendous psychological and financial trauma as a result of bank failures, the failure of a single financial institution has the potential to cause widespread disruption to the country's payments system.

- fingaz