By Buumba Chimbulu
GOVERNMENT delays in paying contractors who borrowed from commercial banks is also affecting the Non-Performance of Loans (NPLs) which stood at 11.8 percent as at end of September 2017, says Bankers Association of Zambia (BAZ).
BAZ chief executive officer, Leonard Mwanza, said economic conditions and higher interest rates had led to failure to meet loan obligations and this had increased NPLs.
Mr Mwanza explained that the legacy of monetary policy tightening in 2015-2016 mopped up liquidity from the market leading to higher interest rates resulting to banks carrying high cost fixed deposits from pension houses such as National Pension Scheme Authority that were expected to unwind in the fourth quarter of 2017.
“Inability to meet loan installments due to high interest rates as well as effects of the slowdown in economic activities which came about due to load shedding, low copper output and prices and stringent monetary policies,
“In addition GRZ delays in paying contractors who borrowed from banks is also affecting the NPLs,” Mr. Mwanza said. Mr. Mwanza, however, said in an interview that the banking sector performance remained satisfactory for the month of September as the industry was adequately capitalised and remained profitable.
And on the slow reduction of interest rates, Mr. Mwanza said economic conditions and higher interest rates had led to failure to meet loan obligations and this had increased NPLs.
“At the end of 2016 NPLs were at 9.9 percent compared to 11.8 percent end of September 2017. Interest rates are on a downward trend in line with reduction of the MPR. The rate is determined independently by the Bank of Zambia, in reaction to the state macroeconomic fundamentals,” he said.
Mr. Mwanza also emphasised on the need to save, saying it was important for the public to save for their future.
“We would like to advise the general public that savings can help push down the high interest rates in the country. So let us all start savings today as our future starts with savings and we must know and plan our finances to live a better life,” Mr. Mwanza said