Lender seeks offshore credit lines
LIVINGSTONE MARUFU
First Capital Bank, a publicly traded financial services provider, is actively pursuing additional offshore credit lines to bolster its resilience against ongoing economic headwinds.
The move aims to safeguard the lender’s balance sheet, enhance shareholder value and support the growth of key productive sectors within the Zimbabwean economy.
To date, First Capital has secured over US$100m credit lines from international lenders, including the European Investment Bank and Afreximbank.
These lines of credit have been instrumental in helping the bank navigate an environment characterised by inflationary pressures and exchange rate volatility.
Given the persistent volatility in both domestic and global markets, First Capital Bank is seeking further credit lines to fortify its operations and preserve shareholder value.
Company secretary Sarudzai Binha emphasised that access to credit lines is vital for stimulating economic growth, especially in the face of restrictive monetary policies that have limited lending opportunities across the economy.
“The Monetary Policy Committee of the Reserve Bank of Zimbabwe implemented several measures on September 27, 2024, expected to alleviate inflationary and exchange rate pressures. Increased statutory reserve ratios and the Bank Policy rate are anticipated to limit the bank’s lending capacity and loan book growth
Therefore, continued expansion in lines of credit will remain key in 2025,” Binha said.
Following a recent business realignment, Binha expressed confidence that the bank’s board and management are well positioned to deliver tailored solutions to clients, expanding the lender’s reach into sectors crucial for Zimbabwe’s economic growth, including mining, agriculture, tourism and manufacturing.
In addition to seeking further credit lines, the bank has implemented a series of internal measures to navigate the economic downturn.
These include business realignment, strengthening internal controls and pursuing cost rationalisation strategies.
A restructuring exercise is also under way, aimed at optimising the bank’s operating model.
According to the International Monetary Fund’s World Economic Output Report issued in October 2024, global economic growth is projected to stabilise at 3.2% into 2025 and this stability reflects reduced headline inflation, expected to decline to 3.5% by the end of 2025, with many economies approaching their central bank inflation targets.
Despite facing both global and domestic challenges, Binha noted that Zimbabwe’s economy continues to show resilience.
Zimbabwe’s 2024 mid-term budget revised local economic growth from 3.5% to 2% primarily due to the severe El Niño-induced drought, however, growth is expected to recover strongly to around 6% in 2025, supported by a rebound in agriculture and ongoing capital projects in manufacturing.
Binha also highlighted that higher import bills are negatively affecting the balance-of-payments outlook and demand for foreign currency continues to exert pressure on the base currency with a devaluation recorded and subsequent monetary interventions.
During the third quarter ended September 30, 2024, the bank’s asset base grew by 23% in the first nine months, driven by an increase in foreign currency holdings.
According to Binha, regulatory capital increased by 20% in the nine months to September 30, 2024, resulting in a capital adequacy ratio of 30%, well above the regulatory minimum of 12%.
Core capital and liquidity ratios also remained comfortably above their respective thresholds of US$30m and 30%.
