BUSINESS REPORTER
The African Development Bank Group (AfDB) has approved a US$7.5m trade guarantee facility for CABS which cushions international banks against the non-payment risk arising from the confirmation of letters of credit and similar trade finance instruments originated by the mortgage lender on behalf of its clients
The facility, which provides guarantees of up to 100%, will benefit small and medium-sized enterprises and local firms that rely on the building society to meet their trade finance needs, the AfDB said in a statement Friday.
“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,” said Stefan Nalletamby, Director of Financial Sector Development at the AfDB.
The approval of the trade finance facility is the first for AfDB under its new transaction guarantee instrument, which was formally launched in July 2021.
Over the next three years, the facility is expected to support more than US$50m in trade between Zimbabwe and the rest of the world, AfDB said.
Lack of adequate credit lines from international confirming banks has 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.
The facility is AfDB’s third non-sovereign intervention in Zimbabwe in recent years and the second to CABS. In 2017, CABS received a US$25m 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, cotton, beef and dairy production..
AfDB currently supports 15 initiatives in Zimbabwe valued at US$176m. These include the rehabilitation of infrastructure in the energy, water and sanitation sectors, financed through resources from the ZimFund.
AfDB also supports initiatives to improve governance and public finance management in the public sector.
Other initiatives involve supporting women and youth to enable them to engage in value addition in agro-based and mining value chains. The Abidjan-headquartered institution also supports Zimbabwe’s private sector through regional financial institutions that operate and invest in the country.
In the financial year ended December 31, 2021, CABS posted an inflation-adjusted surplus of ZWL$5.88bn up from ZWL$2.56bn in 2020, driven by the growth in interest and non-interest income which outpaced growth in operating expenses.
