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Paper Details

An analysis of the causes of non-performing loans in the Zimbabwean banking sector (2009-2013)

Arnold Mtetwa

Journal Title:Organization Leadership and Development Quarterly (OLDQ)

This study provides insight of the impact of economic sectors on non-performing loans in the Zimbabwean banking sector since 2009. Zimbabwean banking sector NPLs have gone beyond the Basel II Accord’s 5% threshold, threatening the sustainability of the banking sector. This study made use of both qualitative and quantitative data. Commercial banks were selected as a sample. According to the results, both internal and external factors were responsible for turning good loans into bad loans. Productive sectors and loans to households dominated the credit portfolios of banks while most banks employed government-led, sector profitability and repayment tenure criteria in allocating credit to various sectors. In the study, it was noted that sectoral distribution of credit had an impact on the quality of the loan portfolio of commercial banks while economic situation, poor bank management, supervision, government interventions, information asymmetry, and poor corporate governance were the major causes of loan impairments. Based on research findings, the study suggested that commercial banks should put in place strategies for credit rationing to sectors according to risk, proactive monitoring and ethical lending practices. The government and the regulator should embark on proactive supervision and monitoring of banks, proper alignment of policies in line with banking laws, establishment of credit reference centres and introduction of measures to sustain the banking sector.