The World Bank approved that management of the International Finance Corporation proceed to prepare a new investment programme for private sector projects in Zimbabwe.
The approval was granted in early February.
Reserve Bank of Zimbabwe governor Dr John Mangudya told a press conference last week that the approval was one of the success stories of the current re-engagement process.
“That’s a big success story for this economy because IFC are known for providing capital to the private sector and new lines of credit to banks. It is a success story for the country.”
He added that it will also add to the transformation agenda that the central bank was currently advocating for a team from the IFC was in the country last week.
Information obtained shows that IFC was given three months (from February) to assess the situation and to consult on areas which need funding in the private sector with particular focus on agri-businesses.
They have so far identified five banks which could get credit lines of up to $200-$300 million.
IFC is a member of the World Bank Group and is the largest global development institution focused exclusively on the private sector in developing countries.
Meanwhile, The Zimbabwe Asset Management Company (ZAMCO), Government’s special purpose vehicle for debt takeover, has acquired $371 million worth of Non-Performing Loans (NPLs) from banks.
ZAMCO, established last year, uses a number of ways to fund acquisition of NPLs, including Government Treasury Bills and loans from foreign funders.
Prior to the establishment of ZAMCO, the Reserve Bank of Zimbabwe (RBZ) had noted with concern that NPLs, which reached 18 percent in September 2014, had caused banks to scale down on new loans especially to productive sectors of the economy.
This had the potential of constraining economic turnaround efforts.
Finance and Economic Development Minister Patrick Chinamasa said failure to pay back loans was one of the biggest challenges affecting the economy.
He said the ZAMCO initiative was paying off, and this would in the long run increase banks’ “appetite” to on lend.
“I am informed that something like $371 million collateralised debt has already been taken over,” he said.
By end of December last year the ratio of NPLs had declined to 10,87 percent largely due to Zamco. The value of secured NPLs in the banking sector is estimated at about $500 million
Minister Chinamasa said the RBZ was engaging local financial institutions to reduce the cost of credit. – Wires.