Four Zim banks court EIB

LIVINGSTONE MARUFU

Four more local banks are negotiating with the European Investment Bank (EIB) for lines of credit  to support the private sector, barely a week after the world’s largest multilateral lender advanced a combined €25m to two financial institutions.

Local banks have been scouring for long term lines of credit  for on lending to the productive sectors of the economy which require patient capital. This comes as the foreign currency auction system has not been able to cater for the needs of companies. The auction is allotting an average of US$25m per week.

EIB head of Southern Africa and Indian Ocean of the EIB,  Jim Hodges, told Business Times on the overtures by local banks but was not at liberty to disclose the lenders that want credit lines.

“We are talking to around three or four banks in Zimbabwe and so far we want to know what their demands are, then we also give them our requirements so that we can see if we can reach an agreement,” Hodges told Business Times.

“It’s a two way conversation as we need to come to the financial institutions and them coming to us. It’s a long process which needs time.”

His remarks come after EIB last week signed a €12.5m deal each with NMB Bank and First Capital Bank in Harare.

Last year, EIB availed a €15m deal  with CABS, becoming the first ever partnership with a Zimbabwe bank in 22 years.

“The EIB is committed to ensuring that Zimbabwe entrepreneurs and businesses can invest through new cooperation with local financial partners. As part of Team Europe, the EIB is pleased to provide funding to local banks to accelerate private sector investment, create jobs and accelerate the post pandemic recovery of Zimbabwe,” Hodges said.

EIB availed around US$4.5bn across Africa but the country managed to get a small fraction of that.

“There are aspects that we do to appraise banks as we cannot just avail any amount without looking into the projects that they support, for example, we can’t give  €30m when a bank has got €10m worth of projects,” he added.

“We talk to the banks as to how much they can  absorb, how much they  can disburse and we discuss with the bank on how much it can handle at that given time.

“We can’t trap a bank into a debt that it can’t pay,” Hodges said.

He said the signing of €25m by NMB and First Capital Bank was precipitated by the quick drawing down of the CABS facility which was quick in terms of the disbursements.

“Usually we allow the banks a period to disburse their loans  and that can take some banks some months or years but Cabs has fully  utilised its facility in a number of months, which is very encouraging for us.

“They were very quick to support their clients and customers,” he said.

EIB said it is  in Zimbabwe to stay, meaning a lot of  facilities are underway.

Hodges said: “CABS can have  another facility in the near future as they have done well with their €15m facility, that is the idea of giving more money to those that have done well with their loans, not only in Zimbabwe but the world. That is how we find partners as we are a long term investor into the projects.”

The facilities gave a vote of confidence in local financial institutions and they also address one of the key bottlenecks in doing business in Zimbabwe which is access to finance.

Local companies have been struggling to access patient capital at a lower cost as the foreign currency auction has failed to meet their needs hence businesses require capital for retooling to become competitive.