Credit Risk Management in Zimbabwe

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European Journal of Business and Management ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online) Vol 4, No.1, 2012

www.iiste.org

An Analysis of the Challenges Faced by Banks in Managing Credit in Zimbabwe
Severino Mavhiki1 Denver Mapetere1* Christopher Mhonde,1 1. Faculty of Commerce, Business Management Department, Midlands State University, P bag 9055 Gweru, Zimbabwe

* E-mail of the corresponding author: mapetered@msu.ac.zw

Abstract
The purpose of the study is to analyse the challenges facing banks in managing credit in Zimbabwe in the wake of the multicurrency regime that was introduced in the year 2009. The study is relevant considering that banks have an important role of financing the undercapitalised productive sectors .The chi-square is used to establish the relationship between the banks' lending decisions and the level of exposure. The results of the study suggest that increasing lending by banks exposes them to high risk of failure. The findings of this study have important implications for policy makers and banks in Zimbabwe. Keywords: risk, credit management, multicurrency, level of exposure 1. Introduction The study examines the challenges faced by banks in managing credit in Zimbabwe. This subject has become a contentious issue given the low lending levels by banks to the country's productive sector, as measured by lending capacity of about 65.01% of the available deposits as at 31 December 2010 against international standards of between 70-80%. The multicurrency regime has incapacitated the Reserve Bank and is no longer in a position to inject liquidity through the banks for onward lending to the productive sector. A number of studies have attempted to explain how various governments and central banks tackled the financial crisis in other countries. Goddard et al (2009) provided an account of the 2007-2009 global financial crises in Western Europe and he detailed measures that were enacted by governments and central banks to deal with toxic assets and



References: European Journal of Business and Management ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online) Vol 4, No.1, 2012 www.iiste.org 45 European Journal of Business and Management ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online) Vol 4, No.1, 2012

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