LEAF operational concept drawn up | The Herald March 17, 2016
Martin Kadzere : Senior Business Reporter
GOVERNMENT has come up with a draft concept paper on the operational modalities of how the $10 million Localised Empowerment Accelerated Facility will be administered, placing much emphasis on minimising the default rate on the loans. The facility, aimed at empowering youth and indigenous Zimbabweans through advancing loans for capital projects, was launched by Vice President Phelekezela Mphoko late last year.It resulted from a partnership between financial services sector and the Ministry of Youth, Indigenisation and Economic Empowerment. The ministry, according to the draft concept, will ensure that LEAF “becomes a sustainable revolving facility” while participating financial institutions would provide critical banking services and monitor its performance.
In 2011, Old Mutual established a similar facility -Kurera–Ukondla Youth Fund – as part of its indigenisation agreement with the Government, but many beneficiaries failed to repay. As such, the proposed LEAF operational modalities seeks to address the anomaly.
The loans will attract an interest rate of 10 percent per annum and may be adjusted, subject to the approval by the ministry and the central bank, according to the draft paper.
The ministry, in partnership with the Reserve Bank would put in place measures and structures to ensure full accountability and loan repayments.
“Participating banks shall bear 100 percent risk as the decision to fund shall rest with them,” read part of the document.
At the end of each quarter, it is proposed that the financial institutions would submit loan status reports indicating the performance of the facility and highlight the type of project funded, number and value of loans granted, gender, constituency and sector. It should also include repayments and default rates.
“LEAF will have a clear system and framework for inculcating within youth a culture of responsibility and accountability over the LEAF in order to increase entrepreneurial success of loan repayments rates.”
The funds would be equitably disbursed among 210 parliamentary constituencies with special focus on interbank communication to ensure that allocations are not exceeded. Borrowers would be required to establish savings accounts as pre-requisites for eligibility to obtain a loan, in which they save 5 percent (repeat borrowers) and 10 percent first time borrowers of the loan. This will not be withdrawn during the duration of the loan.
Reserve Bank director (Bank Supervision) Mr Norman Mataruka has since called on banks to provide comments that would be taken into account in implementing the project.