THE Bankers Association of Zimbabwe (BAZ) says the sector has recorded an increase in local currency loans after the central bank lowered interest rates.
This follows the Monetary Policy Committee move to reduce the medium bank accommodation facility for the productive sectors, including micro, small and medium enterprises from 75% to 70% last month.
However, the association raised fears that the borrowers may face challenges when it comes to the acceptance of the of the local unit as a means of payment in the market.
Following the bank rate hike to 200% last year, the sector had been making concerted efforts to engage borrowers to explore options, which include reducing Zimbabwe dollar denominated loans, shifting to other lending products such as overdrafts where interest cost can be minimised as well as borrowing in United States dollars.
“Productive sector rates have been reduced to within 82% to 94%. As a result, there is high demand for Zimbabwe dollar loans, and the only challenge they may face is acceptance of the Zimbabwe as a means of payment in the market,” BAZ chief executive FanwellMutogo said this week.
For the US dollar lending, Mutogo said, though available, it was constrained by the supply side as the US dollar was a limited resource in this market.
“Interest rates on USD borrowing range between 11% to 15 %, which is high compared to world standards. Therefore, where businesses are borrowing in USD, they need to be sure that their business models can sustain such interest rates,” he said.
Recently RBZ governor John Mangudya, however, has warned against borrowing recklessly.
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There have also been fears that reverting to US dollar loans would lead to a spike in non-performing loans (NPLs) as borrowers struggle to pay back.
But Mutogo allayed those fears saying it had the mechanism to minimise NPLs.
“Banks do risk profiling and due diligence when extending USD loans to businesses. In general banks lend USD loans to clients who have capacity to generate USD revenues and as mentioned earlier, they also look at the margins the applicant is able to achieve with a view on repayment of the loan. Therefore, where cash flows support the loan request, incidences of NPLs will be minimised,” he said.
