MORTGAGE lenders are resorting to the productive sector facility (PSF) for financing as a way of circumventing diminishing cash resources accompanying billions of dollars worth of money tied in
the Reserve Bank of Zimbabwe (RBZ)’s expanded capital adequacy ratio reserves, and the deposit protection scheme.
Two of the country’s leading mortgage lenders Beverly Building Society (BBS) and Central African Building Society (Cabs) have explicitly criticised the implementation of the new solvency measures and how they induce losses through its non-interest-earning nature.
Cabs, the country’s largest building society and owned by cash-rich Old Mutual, has been funneling more money into mortgages as a way of avoiding money getting locked in statutory reserve funds.
On its part, BBS said in group results recently that it was turning to the PSF to extract additional funds for financing operations.
While BBS managing director and building associations chairman Miccah Moyo did not respond to inquiries sent by this paper, his Harare bank says it is in talks with the country’s central bank for cheaper funds to finance projects.
“We continue to engage the Reserve Bank to find ways of accessing the productive sector facility made available from the statutory reserve deposits, as a way of levelling the playing field,” BBS chairman Mike Frudd said.
Following calls by RBZ governor Gideon Gono for financial companies to raise their solvency ratios across-board, building societies are now required to have an adequacy capacity of $7,5 billion with effect from September this year.
Businessdigest could not establish whether BBS’s peers, notably Cabs and Zimbabwe Building Society (ZBS), are growing their advances on the back of PSF borrowing.
A close look at their loan books, however, indicates growth, with Cabs pumping $38,7 billion in the year to June 30, a 299% rise over the corresponding period’s $9,7 billion. ZBS has also managed growth in recent months.
The move to access PSF funds by some building societies also comes on the back of announcements by the group of mortgage lenders to cleverly shun state-linked monetary instruments because of low yields and the inflexible nature of government bills, and other prescribed assets.
By law, financial institutions and institutional investors are required to invest in government commercial paper, but the building societies have been shunning the investments because shareholders lose value in low-yield and control-prone papers.
The move has been seen as opening potential confrontation with gluttonous and cash-hungry Harare.
Meanwhile, Cabs says of the $39 billion in new funds laid out to June 30, about $33,3 billion was advanced “on the security of residential properties”, while $5,4 billion was secured by commercial and industrial properties.
It, nonetheless, said construction activity was “low in all sectors”.
“At least 10% of the funds lent during the year were for the erection of new buildings and improvements to existing ones, while ninety percent financed the acquisition of existing properties.”