Ryan Chigoche
HARARE – The Africa Development Bank (AFDB) is set to avail a US$15 million credit facility to the First Capital Bank, subject to board approval, as the former has plans to commence direct lending to private corporations as part of its portfolio expansion.
This will be the latest initiative by AfDB in its involvement in the local private sector, following the recent US$15 million guarantee facility agreement with another local bank, NMB, where they highlighted that there is a huge scope for lending in the sector.
In recent times, the bank has been actively involved in the provision of funding to the local private sector, with a bias towards agriculture and the energy sector. Local banks, on the other hand, are currently struggling to access finance from offshore banks due to the county’s high risk profile. For example, some of the banks require cash covers, which are usually 100% of the borrowed amount, which is not feasible.
AfDB Country Manager Moono Mupotola told FinX on the sidelines of a recent event, that a US$15 million facility with First Capital Bank is going for approval this March.
”At the end of March, another transaction is going to the board for approval for US$15 million for First Capital Bank. We have about US$80 million, which we availed to the private sector to borrow from us. However, its also important that we work through financial institutions, who then lend directly to the private sector.
Despite the limiting macroeconomic environment, Mupotola said there is scope for investment in Zimbabwe, as she added that they will soon be lending directly to private corporations to grow their portfolios in the country.
”There is provision that there are entities in Zimbabwe that can qualify for AfDB funding. This is just the beginning; we are also now actively looking at cooperatives that we can directly lend to and we hope that as we scale up our work in the private sector, we will be able to directly lend to the real sector to corporates so that we actually grow our portfolio,” Mupotola added.
For First Capital Bank, the facility follows last year’s EUR12,5 million in foreign lines of credit from the European Investment Bank, and also US$20 million was secured through Afreximbank, all to bolster its capacity to support the country’s productive sectors.
For the economy to grow, there is a need to access new finance, which will boost production, and such facilities from the AFDB to the local private sector are expected to go a long way in covering the financing gap in the country.
