Non-performing loans seen rising to 25 percent in 2014

The Reserve Bank of Zimbabwe
The Reserve Bank of Zimbabwe

HARARE, February 7 (The Source) – The level of non-performing loans in Zimbabwe is this year seen rising to 25 percent from 15,92 percent as at December last year, as the economy teeters on the brink of deflation, an independent analyst has warned.

High levels of consumer borrowing would erode the profitability of weaker banks, said Washington Mehlomakulu, a consultant with Jack and Fieldsand Corporate Risk Advisory, with official statistics showing that individuals accounted for nearly a quarter of total credit extended by financial institutions.

“We are going to see more company failures in 2014 and deflation is going to be one of the most serious things that this economy has to deal with. We anticipate the average levels of nonperforming loans to reach 25 percent this year, largely driven by a fall in business activity,” Mehlomakulu told delegates attending a seminar organised by the Institute of Administration and Commerce.

The high level of bad loans has forced the central bank to move in and save the fragile financial services sector by banning insider loans.

Figures obtained from the central bank show that as at 31 December 2013, the total insider loans in the banking system stood at $175,3 million. Of this amount, $117,4 million or 66,97 percent were non-performing.

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