HARARE: The impact of the current liquidity crunch may become more pronounced as it emerged banks have tightened their lending conditions by targeting high net worth clients to avoid contracting bad loans.
Industry sources said that while banks were actively lending to various sectors of the economy, they were now more selective and cautious in their lending, preferring mostly high net or credit worth clients.This comes as banks prepare to participate in the interbank market, which resumed following a $200 million support facility from Africa Export Import Bank. Interbank lending was suspended in 2009.
“We are lending, all banks are lending, but what is happening now is that banks are now seeking high credit worth and net worth clients.”Because of non-performing loans, banks have raised the bar; they are now looking for good, high net worth clients,” a source said.
Bank non-performing loans to total gross loans are the value of non-performing loans divided by the total value of the loan portfolio (including nonperforming loans before deduction of specific loan-loss provisions).
The loan amount recorded as a NPL should be the gross value of the loan as recorded on the balance sheet, not just the amount that is overdue. The source, an executive with one of the major financial institutions, said that while the interbank market had resumed on a good note, it was early days yet to really tell how effective it has been.
Analysts said that the interbank system was very critical for the purposes of helping banks with short positions to meet their obligations, say overnight, and put their liquidity position in order later.
Only last week, Industrial Development Corporation chief executive Mr Mike Ndudzo said subsidiaries under the industrial group required $50 million for bridging finance, but could not get it from the market.He said at best, most banks were willing to restructure existing facilities in a development he attributed to frantic efforts by banks to clean up books to be able to actively participate on the interbank market.
