Source: Banks up SMEs support game | The Herald 11 FEB, 2020
Hilda Muchamiri and Fradreck Gorwe
Trade and Development Bank (TDB), formerly the PTA Bank, has intensified efforts to support growth of local Small to Medium Enterprises by signing a three-year $1 million credit guarantee with NMB Bank, securing loans from the bank to Untu Capital for on-lending to small businesses.
TDB is a specialised investment bank that finances trade and projects in eastern and southern Africa. The bank fosters trade, regional economic integration and sustainable development.
Amounts to be guaranteed under the fresh arrangement will, however, be scalable up to $6 million and will be blended with a technical assistance grant of $250 000 to enhance Untu’s lending capacity to SMEs in Zimbabwe.
The development is in addition to the previous partnership the regional bank had with Untu Capital for a two-year pilot programme valued at $3 million.
The financial support programme is to be pioneered in Zimbabwe before being spread to other eastern and southern African countries.
TDB’s provision of a $1 million guarantee in favour of NMB Bank will go a long way in promoting efficient and effective participation by commercial banks in the SMEs financial support matrix.
Commercial banks and micro-finance institutions have been contributing immensely to the success of SMEs through provision of loan facilities. They have, however, often decried the risk of inadequate funds and unpredictable conditions like defaulted repayments. TDB’s intervention in this case is much commendable.
As commercial banks often find it challenging to understand and lend to MSMEs, there is a significant opportunity for institutions such as Untu Capital to enable these enterprises to become vectors of change and sustainable development in Zimbabwe.
Commenting on the development, TDB’s president and chief executive, Admassu Tadesse, recognised the important contribution by MSMEs in the development of nations across the globe: “We appreciate the value of MSMEs in our economies and are delighted to extend this facility to Untu Capital in favour of NMB Bank, under our SME programme.
“It complements our regular operations which, among other priorities, also target SMEs and mid-cap companies, namely via dedicated lines of credit with various partners around the globe,” said Tadesse.
NMB chief executive Ben Washaya expressed pleasure in being accorded an opportunity to partake in an arrangement that resonates well with its model of capacitating SMEs who, in their ability are the future of the Zimbabwean economy.
“We are particularly pleased to be working with these key long-standing partners, TDB and Untu in supporting the SMEs sector. This guarantee facility enhances our lending capacity to this crucial sector and augments our current efforts to support them,” he echoed.
On the other hand, Untu Capital’s chief executive Clive Msipa also expressed excitement to be working with the two parties: “The lender is excited about this opportunity to work with TDB and NMB in supporting SMEs in Zimbabwe.
“This facility recognises that there are internal resources available within the banking sector for further lending to the sector.
“Untu has supported SMEs in Zimbabwe for the past 10 years and will use its knowledge in playing a crucial intermediation role directing funding to SMEs,” said Msipa.
According to TDB, statistics indicate SMEs contribute to more than half of the country’s GDP, employ over 75 percent of the workforce and make up 70 percent of Zimbabwe Revenue Authority database of registered taxpayers.
Against this reality, they reportedly receive less than 4 percent of loans from commercial banks.
The SME financing gap is valued in sub-Saharan Africa at US$331 billion, including US$42 billion for women entrepreneurs. Their plight is lack of access to finance and all efforts towards closure of this gap is commendable.
While the Government strives to promote the growth of SMEs as vital constituencies in the economic development task, the private sector is often called upon to make some big difference in rescuing these enterprises.