Attachments a last resort - Agribank
06 November 2019 | Banking
“We have a collections policy which is underlined by a process. The process involves reminders to clients at various intervals. The process also allows the bank to enter into repayment arrangements with clients who have fallen into arrears,” says Agribank CEO Sakaria Nghikembua.
“Any repayment arrangements are then monitored. If the client honours the arrangements, there will never be a need to get to attachment of collateral assets.
“We appreciate that honouring a repayment arrangement does not mean that a client is always able to pay 100% of what they have committed,” he added. According to Nghikembua, it is important for borrowers to talk to their bank if they are unable to keep up with their payments.
“If a repayment arrangement is persistently not being honoured or a client simply does not respond to any reminders, this is when the bank then goes to court to get default judgement on a loan.”
“Once granted, and if payment to settle the arrears is still not done, then the bank will seek an execution order from the court and move on to auction collateral assets,” he says. “Auctioning of assets is really a last resort for the bank, which we try to avoid as much as possible by giving the clients more time to rearrange their payments. We do not discriminate in that process.”
He added that there is no political interference when it comes to attachment of assets.
Nghikembua admitted that this year has been particularly tough on the bank but said it was trying to manage the impacts of the drought.
“The current year is a very difficult one for both the farmers and the bank. The drought will impact the performance of the bank from multiple perspectives. In one respect, the collections rate will naturally be slower than expected because of the drought,” he said.
“We accept that. This means inflows into the bank will be lower. In another respect, it means that if the inflows are lower, then the outflows in the form of new loans will also be lower.
“The third aspect to consider is that farmers are more cautious to borrow at higher levels when they face uncertainty about the rain,” he said.