- $60 Million Line of Credit: To help Zim companies with working capital, buy imports
- $20 Million: A non-funded trade finance facility to support imports and exports for SMEs
- The $80 million will expand bank’s loan portfolio, interest income base
Harare- CBZ Bank and African Export Import Bank (Afreximbank) have signed two financing facilities worth a total of US$80 million to support Zimbabwean exporters.
The first facility is a US$60 million line of credit to help Zimbabwean companies purchase machinery and cover their working capital needs. This will enable these businesses to boost their export capabilities.
The second facility is a US$20 million Afreximbank Trade Facilitation Programme Facility (AFTRAF).
This is a non-funded line of credit that will be used to issue guarantees and letters of credit. This complements the first facility by providing importers, including SMEs and larger corporates, with trade finance options that do not require direct funding.
A "non-funded" line of credit or facility means that the financing provided does not involve the direct disbursement of cash or funds to the borrower.
The agreements were signed on Wednesday, June 12, 2024, during the 31st Afreximbank Annual Meetings.
This new financing is expected to strengthen CBZ Bank's position as one of the largest banks in Zimbabwe by loan book size. According to the latest data from the Reserve Bank of Zimbabwe, the top four banks in the country by loan book are CBZ, CABS, Stanbic, and FBC Holdings.
Analysis
The new US$80 million in financing facilities from Afreximbank will have several positive impacts for CBZ Bank: The $60 million line of credit for Zimbabwean exporters to purchase machinery and cover working capital will directly expand CBZ's loan portfolio. This will boost their interest income and overall loan book size, strengthening their position as one of the largest banks in Zimbabwe.
By targeting both SMEs and larger corporates in various sectors, the new trade finance facilities will help CBZ Bank diversify its client base. Expanding beyond their traditional customer segments will reduce concentration risk.
As a result, the increased lending activity, interest income, and reduced credit risk profile from the guaranteed/collateralized trade finance facilities should translate to improved financial performance. This will ultimately boost shareholder returns for CBZ Bank.
Impact on Zimbabwean Exporters:
Zimbabwe has experienced substantial foreign currency shortages over the past five years, with the peak occurring in 2023 and the current fiscal year. This was due to El Niño-induced droughts that impacted agricultural exports and increased the import bill, as well as depressed global prices for platinum group metals (PGMs). These circumstances have significantly constrained the ability of Zimbabwean exporters to acquire the necessary inputs and capital equipment required to grow their businesses.
The new US$80 million in Afreximbank financing is therefore a critical lifeline for Zimbabwean exporters as it will provide exporters with much-needed access to foreign currency to purchase machinery, raw materials, and cover other operational costs. This will enable them to boost production and exports.
This ability to upgrade equipment and expand working capital will enhance the efficiency and competitiveness of Zimbabwean exporters in global markets. The $20 million non-funded trade finance facility offering guarantees and letters of credit will make it easier for exporters to engage in international trade transactions, further supporting export growth.
Overall, this Afreximbank financing package is a significant boost for CBZ Bank and Zimbabwean exporters, helping to overcome the foreign currency constraints and unlock greater export potential for the country.
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