Oliver Kazunga Senior Business Reporter
THE Africa Development Bank (AfDB) has approved a US$7,5 million trade finance guarantee facility to CABS for on-lending to local companies, including Small and Medium Enterprises (SMEs).
AfDB said the approval was the first of its kind under the bank’s new transaction guarantee instrument, which was formally launched in July last year.
“The board of directors of the African Development Bank Group has approved a US$7,5 million trade finance guarantee facility for the Central Africa Building Society (CABS) of Zimbabwe.
“The three-year tenor facility will provide guarantees of up to 100 percent to international confirming banks against the non-payment risk arising from the confirmation of letters of credit and similar trade finance instruments originated by CABS, on behalf of its clients.
“The ultimate beneficiaries will be small and medium-sized enterprises and local firms, who rely on the building society to meet their trade finance needs,” said the regional financier in a statement.
It is hoped that over the next three years, the facility would support more than US$50 million in trade between Zimbabwe and the rest of the world.
AfDB said in the past lack of adequate lines of credit from international confirming banks had restricted the building society’s ability to support its clients’ growth.
“This facility will support the importation of critical inputs such as agro-chemicals, pesticides, farm machinery and other intermediate goods that Zimbabwe needs to revive its agricultural and manufacturing sectors,” it said.
The facility marks AfDB’s third non-sovereign intervention in Zimbabwe in recent years and the second to CABS.
In 2017, CABS received a US$25 million trade finance line of credit, which was accessed by its various clients operating in, among other sectors, agricultural value chain out-grower schemes with smallholder producers of macadamia nuts in Manicaland, cotton, beef and dairy production.
“This trade guarantee facility is a strategic milestone expected to have an important demonstration effect which may prove vital to enhancing comfort to other international lenders to offer additional support to the country’s private sector,” AfDB director of financial sector development Stefan Nalletamby was quoted as saying.
At present, AfDB supports 15 initiatives in Zimbabwe valued at US$176 million.