CABS secures US$25m trade finance loan facility
The African Development Bank Group (AfDB) has approved a US$25 million trade finance line of credit to the Central Africa Building Society (CABS), for loans to large scale firms and small to medium-sized enterprises (SMEs).
This facility will enhance foreign currency liquidity for CABS in a fast dollarising economy.
It will also cover some of the trade finance gaps emerged after most international lenders who either scaled down support to the country or halted their trade transactions due their perception of Zimbabwe as a high-risk jurisdiction.
The facility, which would finance approximately $175 million of trade over a three-and-a-half-year period, marks AfDB’s fourth private sector intervention in Zimbabwe in recent years and the third to CABS.
Lamin Drammeh, head of trade finance at the African Development Bank said: “DFI collaboration is key to private sector development in Africa. This innovative facility will enable CABS to provide liquidity support for SMEs, and women-owned businesses to facilitate their import and export trade finance requirements.”
The facility will also complement the recently approved Transaction Guarantee Facility for US$7,5 million to ensure support along the value chains of SMEs and local corporate businesses in Zimbabwe.
It is expected to boost the relatively low productivity of Zimbabwe’s SME sector, creating jobs and indirectly improving Government revenue through taxes from increased economic activity in the sector.
Despite their immense contribution to economic development, SMEs fail to realise their full potential due to limited access to funding.
Speaking soon after the board approval, AfDB country manager for Zimbabwe, Moono Mupotola, described the line of credit as a strategic milestone expected to have an important demonstration effect, which may prove vital to encouraging other international and regional lenders to offer additional support to the country’s private sector.
The AfDB Group currently supports 13 initiatives in Zimbabwe valued at US$144 million. These include initiatives to improve governance and public finance management in the public sector.
Other AfDB supported projects entail support to women and the youths to enable them to engage in value addition in agro-based and mining value chains.
The bank has also been supporting the rehabilitation of key regional and national energy projects, including energy reform technical assistance for Zimbabwe’s transition to climate smart energy solutions.
The bank further supports Zimbabwe’s private sector through regional financial institutions that operate and invest in the country.
In 2013, the AfDB established the Trade Finance Program (TFP) with the main objective of reducing the trade finance gap in Africa by complementing the activities of private sector actors and regional institutions already active in the field of trade finance.
The Trade Finance Division offers trade finance through the provision of risk mitigation facilities, liquidity, equity and technical assistance to financial institutions and commodity aggregators. -herald
