CBZ caps external loans at US$200m for this year

Nelson Gahadza

CBZ Holdings has capped its lines of credit at US$200 million for 2024, having already mobilised over US$155 million, which has been deployed largely to key economic sectors, mainly export-oriented ones, with the capacity to repay.

The bank has subsidiaries in banking, insurance, investments, wealth management, mortgages and retail finance.

CBZ group chief executive officer Mr Lawrence Nyazema said the institution’s current loan book of US$400 million accounts for an estimated 25 percent of total loans in the domestic market.

“In terms of credit lines, we are largely done for this year as we are targeting lines of credit of about US$200 million.

“We are now at US$155 million, so perhaps we could add another US$20 million, but we will do it in a measured way.

“We can raise (more lines of credit) significantly, but what it also means is that we need to be aware and be sure that when the time to repay comes, you have generated enough exports for you to be able to comfortably repay, hence, going forward, it is important that we are diligent and ensure that whatever we get, we deploy it diligently to those who have the capacity to repay,” he said.

Mr Nyazema said the group had started pursuing external lines of credit after struggling to raise adequate deposits on the domestic market to fund new loans.

He said, in June this year, the group brought in US$80 million from the African Export-Import Bank (Afreximbank), US$15 million from Shelter Afrique and another US$20 million from Trade and Development Bank.

“We had a pipeline of at least US$100 million, and we wanted to make sure that the US$100 million is financed and continued lending.

“We have not been affected by the liquidity crunch as it probably did to the average player in the market in that we have the size and capacity to bring in lines of credit when we require them,” said Mr Nyazema.

He noted that, when it comes to lines of credit, the mobilisation of new facilities had to be measured because this was an external obligation different from borrowing from another local bank.

“So, even if the US$15 million from Shelter Afrique falls due, it is in the interest of not only CBZ but of the whole country to ensure that we pay on time because if we default as CBZ, it affects the ability of the next bank to borrow from the external financiers because once it gets into the public, other international lenders will make a call,” said Mr Nyazema.

Shelter Afrique is a Pan-African finance institution, and its facility to CBZ Bank is targeted at financing the construction of residential housing units and financing mortgages.

The Pan-African institution is solely dedicated to financing and promoting housing, as well as urban and related infrastructure development across the African continent. It operates through a partnership involving 44 African governments, including Zimbabwe, as well as the African Development Bank and the Africa Reinsurance Corporation.

According to Mr Nyazema, the additional financial infusion would further strengthen CBZ Bank’s position in the housing sector and contribute to the institution’s sustained growth and development.

At the 31st Afreximbank Annual Meetings held in the Bahamas in June this year, CBZ Bank secured a US$80 million facility from Afreximbank to support trade financing for the country’s productive sectors, as well as for capital expenditure financing.

According to CBZ, US$60 million would support prime exporters and small and medium enterprises (SMEs) involved in the export value chains across key sectors that require financing for asset or machinery acquisitions.

The facility also supports exporters and SMEs with working capital to facilitate inventory, the supply chain, and pre-export and post-export business activities in Zimbabwe.

The bank said US$20 million is for supporting the Afreximbank Trade Facilitation Programme Facility, a non-funded line of credit to facilitate the issuance of guarantees and letters of credit.

Meanwhile, banks in Zimbabwe are increasingly providing credit facilities to prime exporters and SMEs, as most international financiers require clear sources of repayment for their loans. Commenting on behalf of the Bankers Association of Zimbabwe recently, Mr Nyazema said export proceeds are the main repayment source, even in the multi-currency environment.

“Most international financiers want clear sources of repayment for their loans. Export proceeds are the main repayment source, especially when the multi-currency environment comes to an end,” he said.

He said horticulture is a clear example, where exports are dominated by SMEs compared to large corporations, and even in cases where funding goes to large corporations, the benefits usually flow to SMEs, which supply some of the raw materials.

“Looking at the tobacco sector, a lot of the green leaf production is by individuals and families. Therefore, the funding can go to a large tobacco merchant, but the impact will be across the market,” he said.

According to the Reserve Bank of Zimbabwe (RBZ)’s Banking Sector Industry Report, as at March 31, 2024, total banking sector loans and advances increased by 256,04 percent from $11,26 trillion as at December 31, 2023 to $40,09 trillion as at 31 March 2024 mainly due to an increase in foreign currency-denominated loans, which accounted for 90,88 percent of the sector’s total loans. These figures were in Zimbabwe dollars, before the introduction of Zimbabwe Gold (ZiG).

During the period under review, the RBZ said, banking institutions continued to play their critical financial intermediary role, with considerable funding going to the productive sectors of the economy to support economic growth. The central bank said the sector continued to maintain robust credit risk management systems as evidenced by the low aggregate non-performing loans to total loans ratio (NPL ratio), which closed the quarter at 2,17 percent, representing a marginal increase from 2,09 percent reported in December 2023.

The NPL ratio, however, remained well within the bank’s risk appetite and the internationally acceptable threshold of 5 percent.

According to Mr Nyazema, banks are holding nearly US$3 billion in deposits, but only half of this amount is being loaned out due to factors such as the nature of deposits and the end of the multi-currency system in 2030.

Additionally, an estimated number of credit lines contributes another US$300 million-$400 million, bringing the total available lending pool to roughly US$3 billion.

Despite this availability, banks have only advanced approximately US$1,5 billion, which translates to a low loan-to-deposit ratio compared to regional and international markets.