Zimbabwe: Agribank Cuts Down On Bad Debtors

Source from:  The Herald (Harare) 4 September 2007 09/05/2007

THE Agricultural Development Bank of Zimbabwe last year managed to significantly cut down bad debtors with cumulative advances extended towards agriculture financing expanding to $150,8 billion. Agribank reported last week that bad and doubtful debts declined to $12,8 billion in the interim to June 30, from $50,9 billion a year ago. Bad debts recovered stood at $4,8 billion against zero for 2006. Non-performing loans and advances at $4,3 billion were 3 percent of gross loans, marginally up from $3,9 billion in 2006. The data, however, represent a marked improvement versus sharp loan defaults reported three to five years ago. Over the years, rampant loan defaults have curtailed growth of Agribank's agriculture lending portfolio. The bank has been employing several strategies to rein in on defaulters. In its half-year to June 30 numbers, Agribank said net loans extended towards agriculture and individual funding rose to $150,8 billion from $30,8 billion in historic terms. In inflation adjusted terms, the figure was down from $529 billion extended to several farmers in 2006. Of the 2007 amount, agriculture accounted for 90 percent of aggregate loans and advances, down from 93 percent a year earlier. The remainder was loaned to individuals. The bank reported further, in historical accounts, $30,7 billion was loaned under the Agriculture Sector Productivity Enhancement Fund, up from $13,8 billion. On a sectoral basis, tobacco loans chewed up $1,1 billion while funding for strategic grain reserves such as maize took up $12,01 billion. Some $201 million was directed towards the winter wheat crop, livestock loans taking up $3 million and $4,3 million going towards bridging finance. Funds under ASPEF are intended for the purchase of fuel, seed, fertilisers, ploughs, tractors and replacing vandalised or stolen irrigation equipment. Agribank posted a net profit of $53,5 billion while net interest income stood at $282 billion. The bank paid a substantial amount in interest expenses at $54 billion. Basic earnings per share grew to $48,71. The bank's balance sheet stood at $999,6 billion with shareholders funds amounting to $86,9 billion. Cost to income ratio blew to 72 percent from only 16 percent in 2006, as explained by high operating costs standing at $202,6 billion resulting in a loss before tax of $51,4 billion. Staff costs at $79,8 billion constituted the biggest chunk of overall expenditure. Capital adequacy ratio declined from 16 percent recorded in December 2006 to 8 percent which is below the minimum requirement of 10 percent. "This decline was caused by the increase in risk-weighted assets as the bank increased its lending to farmers but without a corresponding increase in capital," said Agribank. Agribank has over the past few years been dogged by loan defaulters as some farmers diverted the funds for non-farming activities. Some stringent lending conditions coupled with frequent farm visits were aimed at ensuring that the bank keeps track of its loan repayment records, said the bank. The funds would be expected to go a long way in enhancing productivity in the agricultural sector which had fallen as a result of successive droughts over the past few years. Enditem