BARCLAYS Bank of Zimbabwe Limited, which is set to access about US$100 million in offshore lines of credit this month, has cautioned that it might be forced to overlook small businesses and individuals in order to avoid rising defaults. Barclays managing director Mr George Guvamatanga last week said the lender has adopted a robust business model that excludes Small and Medium Enterprises (SMEs) and individuals in order to reduce non-performing loans.
“By June we should have accessed offshore lines of credit of about US$100 million which we will use to support those companies that will be doing well,” said Mr Guvamatanga.
“We want to do business with people whose cash flows we understand.
“On the SMEs, we want to deal with suppliers of companies such as Delta (Corporation) and Innscor (Africa Limited) because we know that they will pay.
“Regards individuals (sic) wanting loans, we also deal with those working for trusted organisations because everyone now knows that a payslip is just a promise to pay.
“The question is, ‘does the money indicated on the payslip hit the individual’s bank account?”
Zimbabwe is battling a serious cash squeeze since adoption of multiple currencies in 2009 to tame galloping inflation.
This has resulted in capacity utilisation in the manufacturing sector plunging from about 57 percent in 2010 to between 35 and 40 percent last year.
Most companies, SMEs in particular, that had shown signs of revival since the hyper-inflationary era, have either closed or are significantly downsizing, shedding many jobs in the process.
The country has been hit by loan defaults, with non-performing loans standing at 15,92 percent as at December 31, 2013, which is way above the 5 percent international benchmark.
Over 60 percent of youths who benefited from the US$5,6 million youth fund that has been distributed from 2011 to April this year have failed to repay the US$5 000 revolving loans.
Mr Guvamatanga said Barclays has been able to keep the loan loss ratio at about 1 percent, and will try to maintain it at that level. He noted that agriculture is the sector that is largely contributing to the non-performing loans, followed by manufacturing, which, he said, is being hamstrung by imports.
The bank has a loan to deposit ratio of 47 percent so as to protect depositor funds but said ideally it should be between 65 to 70 percent.
However, analysts fear that while Barclays’ decision to shut out SMEs from benefiting from the US$100 million credit lines and other local facilities is prudent given the high rate of loan defaults, it could rile Government which has come up with policies deliberately designed to spur SMEs growth.
It is believed that SMEs are contributing about 60 percent to the country’s Gross Domestic Product.
The credit lines would come with an interest rate of 8 to 9 percent, which is relatively low considering that other financial institutions price their loans at between 12 and 18 percent on short-term loans.
Meanwhile, Mr Guvamatanga said ever since Barclays Bank Zimbabwe came under Barclays Africa, it has done fairly well.
“The growth levels have been higher ever since we shifted from London to South Africa because South Africa is closer to Zimbabwe and they are always aware of what is happening here.
“Johannesburg is about one and half hours away so it is good for our operations but bad for my air miles,” he said.
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