Global Journal of Commerce & Management Perspective
Open Access

Abstract

An Investigation of the Challenges Faced by Zimbabwean Banks in Managing Non Performing Loans (2009-2014)

Tshuma Nothando & Karasa Nyasha

The Zimbabwean banking systems has been burdened by non-performing loans. Bad loans have created several problems for commercial banks in Zimbabwe hindering efficient functioning of banks. It is for this reason that commercial banks have adopted non-performing loans management strategies so as to improve financial performance. This study sought to establish the challenges faced by commercial banks in managing non–performing loans (NPLs) in Zimbabwe (2009-2014). A descriptive survey design was adopted as the research design. The population of this study consisted of 12 commercial banks in Zimbabwe. The primary data was collected using structured questionnaires and interviews. The study found that weak judiciary systems, time constraints, poor macroeconomic conditions, ICTS challenges, poor organizational structures, over borrowed clients who lack collateral and subprime lending are the prevalent challenges in Zimbabwe. It is therefore recommended that the government spearheads macroeconomic turnaround by implementing policies that promote economic growth and development. It is difficult for banks to report the real levels of their NPLs without a proper reporting system. Banks should upgrade their ICT systems in order for them to detect the early warning signs of accounts that are going under. Banks do not have adequate capacity to screen and monitor their borrowers and therefore distinguish between good and bad risks. The credit markets have been faced with adverse selection and moral hazard problems attributed to information asymmetry among lenders and borrowers. It is therefore important that lenders supplement their information about borrowers with that of other lenders through the establishment of a credit bureau in Zimbabwe