NMB, POSB on the hunt for forex credit lines as USD lending rises

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NMB chief executive officer Gerald Gore and Reserve Bank of Zimbabwe's Deputy director Bank Surveillance, Racheal Mushosho at the official opening of the new NMB head office in Harare on Wednesday Aug 24, 2022

Talkmore Gandiwa/Edwell Chigangaidze

HARARE – NMB Bank says it is in negotiations for US$20 million credit lines from two potential financiers, which assist it to service the increased demand from manufacturing and exporting clients.

Chief executive Gerald Gore said the bank had seen growing demand from the horticulture sector – particularly blueberry farmers as well the manufacturing sector. The €12 million facility from the European Investment Bank is almost fully utilised.

“We have engaged two potential financiers for credit lines of around US$20 million and these should be signed off soon. The lines will prioritise exporters as they have the capacity to repay loans in a volatile local environment.”

Gore said interest rates on the facilities would range between 8% and 10% depending on the financial institution.

Meanwhile, POSB is also targeting to sign off a US$1million line of credit by year end from international financial institutions.  Chief finance officer Garainashe Changunda said the bank has a high appetite for lines of credit from international financiers as the US$ loan book continues to gain traction from clients.

“Our clients are demanding products in USD, so we are in the market looking for a line of credit to support the operation of our clients. We have set a target of US$1 million by year end,” said Changunda.

Recently, President Mnangagwa gazetted Statutory Instrument 118A of 2022 entrenching the multi-currency system. The SI is titled Presidential Powers (Temporary Measures) (Amendment of Exchange Control Act) Regulations 2022. The measures will run for the duration of National Development Strategy 1 (January 2021-December 2025).

Among other measures, the regulations empower registered lenders, banks or any financial institution that lend foreign currency to receive repayment of the loan or credit in that foreign currency.

In the mid-term Monetary Policy Statement, RBZ Governor John Mangudya said total banking sector loans and advances increased by 61% from $142.79 billion as at 30 June 2021 to $229.94 billion, largely attributed to the translation of foreign currency denominated loans.

Foreign currency denominated loans constituted 36.87% of total banking sector loans, an increase from 30.16% reported as at 30 June 2021. In the prior year the banking sector contributed 76.29% towards supporting the productive sectors of the economy as evidenced by loans to the productive sector.

Economist Joseph Mverecha said banks are increasingly lending in USD because that is the only way to preserve and grow balance sheet value. “Banks will revert to lending in local currency once Authorities have stabilised the local currency and when it fulfils all the functions of money, store of value, medium of exchange, stability, among others.”

Economic analyst and former banker Farai Mutambanengwe said the USD lending makes a lot more sense the current economic environment. “The ZWL is on an unfavourable footing. This is because of the high interest rates and the high inflation, which makes it an unstable currency.”

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