Alone we can do so little; together we do so much, once said American author, political activist and lecturer Helen Keller.
When a pan African bank, a local financial institution and a 10-year old micro-financier combined forces last week, they hammered a roadmap which crowds in funding from the local financial sector for onward lending to SMEs.
Here was a partnership of three players: Trade and Development Bank (TDB) with a strong balance sheet of US$6bn, NMB awash with local currency but requires credible customers who repay loans and Untu Capital with a customer base but does not have the resources to lend.
This saw TDB issuing a threeyear guarantee of ZWL$1m on loans Untu Capital get from NMB Bank for on-lending to SMEs.
The guarantee can be scalable up to ZWL$6m. TDB has also given Untu a technical assistance grant of ZWL$250,000 to make the microfinancier “bigger and stronger” to increase its reach.
“We don’t have local currency. We can’t give local currency lending. NMB will then provide the facility to Untu on the strength of that[guarantee]
If anything goes wrong we pay,” said Gloria Mamba, TDB’s Coverage Executive Anglophone Southern Africa and Asset Management.
Untu Capital CEO Clive Msipha said the novel transaction would assist SMEs.
“This is really a first for our market, the guarantee in local currency that exploits the local resources that are available in the financial services sector and ensure that they are allocated to appropriate SMEs to support their activities,” Msipha said.
The transaction gives confidence to other financiers that have been sitting on the fence due to Zimbabwe’s perceived political risk status and a debt overhang which has made the economy’s balance sheet unattractive.
The absence of international lines of credit, coupled with low confidence, has triggered a forex crunch, making it difficult for companies to import raw materials and machinery.
But Mamba said there is a way out for financiers if they understand the market.
“I think you need to know your market and we have been operating in Zimbabwe for the past 35 years.
We understand well the market of the region in which we operate. So we are able to identify the opportunities that make us successful,” Mamba told Business Times last week.
The guarantee is the first of its kind to be extended under TDB’s SME Programme launched in 2018.
The programme’s approach consists of leveraging TDB’s seed capital, blending it, and directing it through partner financial institutions that target SMEs – from micro-enterprises to missing middle SMEs – as their client-base.
The SME programme will run in six African countries—Zimbabwe, Burundi, Ethiopia, Kenya, Malawi and Zambia.
“The idea was to run a pilot programme for two years, seeing what we learn and what can be useful and then based on lessons learnt and experiences, we can then roll it across our 23 member states,” Mamba said.
NMB CEO Benefit Washaya said he was indebted to TDB for coming to the party when other international financiers view Zimbabwe as risky.
“The SME sector is risky. Many international players view Zimbabwe as a risky country to the extent that you have come forward and said you want to assist Zimbabwe, you want to assist SMEs.
We will always remain indebted to you. We don’t take that support lightly. We believe you have chosen the right partner in going into bed with Untu and you will not regret this decision,” Washaya said.
“I hope that when you make a success from this transaction, you will be able to go deeper into the market and come up with more transactions.”
It is estimated that in Zimbabwe, SMEs contribute more than half of the country’s GDP, employ over 75% of the workforce, make-up 70% of Zimbabwe Revenue Authority’s database of registered taxpayers, while only receiving less than 4% of loans from Zimbabwean banks.
SMEs have faced challenges in accessing financing, chief among them, the inability to provide collateral and form records required by the financial services sector.
This, according to Msipha, has seen Untu designing “risk frameworks and credit methodologies that allow us to understand our clients who are the SMEs and provide tailor-made solutions”.
“SMEs remain a credible source of future corporates in Zimbabwe and Africa in general,” Msipha said.
Washaya said the bank has channelled funds to the SME sector. It is the anchor for the future growth of the economy due to its resilience. “We acknowledged that it[growth]
was going to come from SMEs… they are very nimble, they move extremely fast and in extremely difficult circumstances, they normally succeed where corporates fail,” Washaya said