Harare — All financial institutions will now participate in the US$70 million Zimbabwe Economic and Trade Revival Facility unveiled by the government recently to fund the revival of local industries.
Previously, Finance Minister Tendai Biti had indicated that only small financial institutions were to participate in disbursing the facility to its targeted beneficiaries.
In a statement last week the Finance Ministry said no banks would be left out of the fund in which Africa Export and Import Bank is playing a key role.
"All banks are eligible to participate in the facility unless otherwise advised at a future date," reads part of the statement.
"The facility, which is funded by the Government of Zimbabwe and the Africa Export and Import Bank, is available to Zimbabwean registered companies including small and medium scale enterprises. US$45 million of the facility is earmarked for the acquisition of equipment and capital goods while US$25 million will be for working capital," the statement said, adding companies will access the funds at a cost of five percent per annum. The five percent interest rate is in sharp contrast to punitive real borrowing rates of between 24, 7 percent and 44,7 percent which banks have been demanding.
Zimbabwe's banks have battled to channel loans into companies since the country moved to multi-currencies last year because of lack of confidence in the financial system that has kept away depositors.
More than 60 percent of the country's deposit base, estimated at US$1,8 billion around the second quarter of the year, are held by the big four banks - CBZ Bank, Barclays Bank, Stanbic Bank and Standard Chartered Bank.
Fixed deposits have remained at negligible levels.
This, coupled with the volatility of deposits, the absence of an interbank market and lender of last resort, has meant that loanable deposits are significantly reduced as banks try to maintain prudential loan-to-deposit ratios to avoid liquidity problems.
Demand for loans has been at an all time high as manufacturing, mining and retail businesses re-tool and restock in response to an improved business climate since February last year when government implemented measures to arrest economic decline, and reduce inflation.
The statement come as good news to local companies that have been failing to access funding at affordable interest rates.