How the blockchain nails serial debt defaulters
Zimbabwe�s economic situation has seen many
of those borrowing from financial institutions failing to honour obligations.
The high incidences of defaulting are amplified by cases of high profile
individuals who have had properties attached and auctioned off to settle their
debts.
Nevertheless, it is also apparent that some individuals have deliberately default because they are aware that taxpayers through government will pick up the tab. The piece examines how the Blockchain technology can put a stop to this without the need to expend many resources.
In 2014, Zimbabweâs central bank, the Reserve Bank of Zimbabwe (RBZ) created an entity, the Zimbabwe Asset Management Company (ZAMCO) that it mandated to take over toxic debts on the books of financial and non-financial institutions.
Toxic debts
These toxic debts or non-performing loans (NPLs) as they as commonly known, are loans which debtors fail to service for one reason or the other. Apparently, it seems a deliberate failure to repay loans does not come with the usual perks such as getting blacklisted or being declared insolvent.
As a consequence, the average NPLs levels in proportion to the total advances, had by 2014/15 reached a dangerous rate of 20.45% against a standard of 3% or less. The lack of a deterrence against failure to payback is partly responsible for this growth.
Many banks, including the countryâs biggest when measured by the deposits mobilized, the Commercial Bank of Zimbabwe (CBZ) Holdings, faced uncertain futures as their NPL ratios had ballooned to alarming levels.
Something
Posted from my blog with SteemPress : https://africablockchainmedia.com/news/how-the-blockchain-nails-serial-debt-defaulters/2020/02/05/