Non Perfoming Loans in Commercial Banks in Zimbabwe Is Now a Cause of Concern as It Is Threatening the Survival of Banks Bit by Bit
Journal of Emerging Trends in Economics and Management Sciences (JETEMS) 3(6): 882-886 © Scholarlink Research Institute Journals, 2012 (ISSN: 2141-7024 jetems.scholarlinkresearch.org Economics and Management Sciences (JETEMS) 3(6):882-886 (ISSN:2141-7024) Journal of Emerging Trends in
Insights on Non-Performing Loans: Evidence from Zimbabwean Commercial Banks in a Dollarised Environment (2009-2012)
1
Laurine Chikoko, 2Tendekayi Mutambanadzo and 3Takaiona Vhimisai
1
Department of Banking and Finance, Midlands State University, P Bag 9055, Senga, Gweru. 2 Department of Banking, National University of Science and Technology P O Box AC939, Ascot Bulawayo. 3 Department of Banking, National University of Science and Technology P O Box AC939, Ascot Bulawayo. Corresponding Author: Laurine Chikoko ___________________________________________________________________________
Abstract This study was prompted by the gradual deterioration in asset quality in most commercial banks in Zimbabwe after the adoption of the multiple currency exchange rate regime. The poor asset qualities were reflected by the non-performing loans trending towards the watch list category. In this regard we investigated the commercial bank credit process with the objective of understanding the fundamental causes of the impaired assets that are bedeviling the Zimbabwean banking sector so that some of the mistakes are not repeated and correctional measures are put in place. The methodology adopted a survey research design with use of questionnaires and interviews with commercial banks head credit risk, head retail and head corporate banking division from 15 registered commercial banks in Zimbabwe. Research findings show that some banks were sitting on nonperforming loans due to poor credit analysis processes; wrong products offered to the clients; lending based on balance sheet strength instead of cash flow based lending; banks taking too much comfort in security; information asymmetry leading to moral
Insights on Non-Performing Loans: Evidence from Zimbabwean Commercial Banks in a Dollarised Environment (2009-2012)
1
Laurine Chikoko, 2Tendekayi Mutambanadzo and 3Takaiona Vhimisai
1
Department of Banking and Finance, Midlands State University, P Bag 9055, Senga, Gweru. 2 Department of Banking, National University of Science and Technology P O Box AC939, Ascot Bulawayo. 3 Department of Banking, National University of Science and Technology P O Box AC939, Ascot Bulawayo. Corresponding Author: Laurine Chikoko ___________________________________________________________________________
Abstract This study was prompted by the gradual deterioration in asset quality in most commercial banks in Zimbabwe after the adoption of the multiple currency exchange rate regime. The poor asset qualities were reflected by the non-performing loans trending towards the watch list category. In this regard we investigated the commercial bank credit process with the objective of understanding the fundamental causes of the impaired assets that are bedeviling the Zimbabwean banking sector so that some of the mistakes are not repeated and correctional measures are put in place. The methodology adopted a survey research design with use of questionnaires and interviews with commercial banks head credit risk, head retail and head corporate banking division from 15 registered commercial banks in Zimbabwe. Research findings show that some banks were sitting on nonperforming loans due to poor credit analysis processes; wrong products offered to the clients; lending based on balance sheet strength instead of cash flow based lending; banks taking too much comfort in security; information asymmetry leading to moral
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