The country’s biggest banking group by assets and deposits, CBZ Holdings Limited, has secured US$40 million export-oriented loan facility from the Africa Export-Import Bank (Afreximbank) that will assist local companies. The facility will assist companies that are only into export businesses as the country targets an export-led economic growth and boost foreign currency earnings.
Group chief executive officer Dr Blessing Mudavanhu told The Herald Business that this was a positive sign as it showed Zimbabwe still has room to get external funding at a time its risk profile is perceived high with other multi-lateral lenders averse to extend credit lines to the country.
Industry has been struggling to get lines of credit and access foreign currency for retooling or procure essential raw materials resulting in some companies cutting down on production.
Dr Mudavanhu indicated the group was also in discussions for other facilities for its capex while the vetting process for potential beneficiaries of the Afreximbank facility were already underway.
“We just got a US$40 million export oriented facility from Afreximbank.
“So, we are still working on other facilities and this is a good sign that we still have outside financial institutions that are actually helping us,” said Dr Mudavanhu in an interview in the capital.
“This is targeted towards export oriented businesses.
“We are also in discussions to have a more multilateral facility that will take care of working capital, but for now we are looking at trade finance type of businesses.
“Right now we are in discussions with some key clients to see if they fit within that facility and the terms and conditions,” he said.
Government has placed emphasis on export business with several reforms undertaken to enhance ease of doing export business, with the ultimate goal of increasing foreign currency inflows into the country.
Tobacco and gold are Zimbabwe’s biggest export earners.
For CBZH, Dr Mudavanhu indicated, one of its key focus areas is to help in the economic turnaround process through lending to strategic sectors of the economy.
The group would, however, employ due diligence to avoid bad loans.
As at April 2019, its non-performing loans ratio was at 15 percent, an improvement from 16,4 percent in December 2018 and the group is targeting to achieve a single digit NPL ratio by end of this current financial year.
One of the strategies is to grow its loan book.
Dr Munhavanhu said: “One easy thing to do to reduce NPL is grow your loan book and increase that role of credit extension to business, this is how we turn around the economy.
“But it does not necessarily mean if you grow your loan book NPLs automatically come down, that is why we are making a deliberate move to strengthen our loan origination standards and credit risk.”
Agriculture and the small to medium enterprise (SME) sectors have been the major contributors of bad loans and Dr Mudavanhu said loans needed to be structured in line with the seasonal nature of the business.
For SMEs, more needed to be done to educate them on financial literacy, and signs of improvements in financial and basic business management principles among entrepreneurs beginning to show.–herald.c.zw