CBZ Holdings has secured a US$20 million credit line from the Trade and Development Bank Group (TDB) to be channelled to exporting companies.
This is the part of the regional development financier’s commitment to provide cumulative lines of credit worth US$50 million through various local financial institutions amid a huge demand for credit.
CBZ group chief executive, Lawrence Nyazema, said this is not the first facility the bank is undertaking with TDB, as their relationship dates back to 2007.
“Over that period, we have gotten at least US$200 million from TDB. Those funds have been distributed in the wider Zimbabwe economy, mostly the productive sector. With particular reference to the US$20 million line, it is primarily targeted at exporters.
TDB chief executive officer, Michael Awori and CBZ group chief executive, Lawrence Nyazema
“The reason we are targeting exporters is that we want to create repayment capacity so that when the tenure of the facility reaches maturity, we would want to have foreign currency to repay TDB,” he said.
“Being able to fully repay facilities and lines of credit is important, not only to CBZ but to the rest of the financial institutions in the land. Should word go out that for whatever reason CBZ has failed to service its facility, it affects other financial institutions,” Nyazema added.
CBZ has recently announced that it is adopting a cautious approach to ensure that its expansion is sustainable and aligned with its strategic objectives.
Compared to lending companies that fully operate domestically, the bank has a better probability of recovering loans when it extends credit to exporters.
“We have, again, other private sector corporates, I would say, that we are already looking at deploying upwards of US$50 million on those corporates in terms of transactions that are already being progressed within the system,” TDB chief executive officer, Michael Awori, told The Financial Gazette recently.
Regarding repayment modalities, Awori noted that they vary depending on the specific transaction and customer.
“There is a range; it could be working capital, so in the shorter term, it could be maybe one year or even less than one year, depending on what we are actually financing.
“In some cases, where we are financing equipment, capital expenditure for companies tends to be a little bit longer. So in that case, three years, maybe even five years. So it really depends on what the underlying use of the funding is for,” Awori said.
Meanwhile CBZ attributed demand to the widespread market liquidity crunch that has widened the mismatch between demand and supply.
The shortage of foreign currency has created a huge capital gap in the economy at a time when the newly introduced local currency, the ZiG, is starting to show signs of instability.
In response, banks are increasingly becoming a major force behind the rise of residential real estate in the economy as it is generally perceived to be a good hedging asset class.