AfDB avails $238 million guarantee for MSMEs through RBZ
The African Development Bank through its Youth Entrepreneurship Initiative has provided a guarantee multi-donor trust fund for Zimbabwe Micro, Small and Medium Enterprises (MSMEs) to access cheap capital funding that requires less collateral.
AfDB has partnered the Reserve Bank of Zimbabwe (RBZ) as the intermediary with financial institutions and the Zimbabwe Agricultural Development Trust (ZADT) as the training institution of the selected MSMEs.
The fund will be deployed through financial institutions that will do the due diligence and if satisfied by the business, AfDB will then finance 50 percent of the capital needed.
The fund is a guarantee for the country and currently Zimbabwe has US$238 million.
The African Guarantee Fund representative, acting region, business development southern Africa head, Nicole Muia, said: “Currently the fund for Zimbabwe is $238 million, which can grow depending on the needs of the MSMEs as the total fund for Africa is US$4 billion.”
“The fund does not have any specific sector it is targeting, it will support agriculture, manufacturing, export, infrastructure development as well as the transport sector. The important thing to this fund is getting capital to the MSMEs for them to produce better,” Muia noted.
Muia said that MSMEs are not at risk if they sink or fail because they are not part of the contract, the contract is between AfDB and the financial institution, so in an unfortunate case, the bank and the financial institution will iron out any liabilities.
RBZ deputy governor, Dr Jesimine Chipika said, “there is a huge appetite from the financial institutions to take up this initiative as they feel the need to support local businesses to grow into formidable companies.”
The fund has partnered with eight banks and nine microfinance institutions, which include FBC Bank, CBZ Bank, NMB Bank, Ecobank, Success Microfinance Bank and Getbucks among others.
The regulator also assured the MSMEs that regulatory support for them to formalise and enjoy these discounted capital as well as cheap foreign currency on the auction market.
ZADT chief executive, Godfrey Chinoera said, “Access to finance is one of the key hindrances preventing youth-led MSMEs from growing their enterprises. These MSMEs cannot access financing because of their informality and general lack of capacity to present credit-worthy business plans and financial records and reports of their enterprises.
The Youth Entrepreneurship and Innovation Multi-Donor Trust Fund collaborates with the African Guarantee Fund to address issues affecting youth-led businesses in the broader value chain in relation to formalization and preparedness to access financing.” Across Africa a total of four hundred MSMEs will be trained in various business development topics, with 200 MSMEs also receiving mentor support.-eBusiness Weekly
