Online Reporter
Business Reporter
The Reserve Bank of Zimbabwe (RBZ) has disbursed ZiG350 million through its Targeted Finance Facility (TFF), launched in February this year, to support key productive sectors.
The facility largely supported the manufacturing and agricultural sectors, which accounted for 44,82 percent and 34,73 percent of the total disbursements, respectively, as of June 30, the central bank said.
The TFF’s core objective is to ensure a continuous flow of credit to these vital areas of the economy.
The introduction of the TFF followed the RBZ’s implementation of tight monetary policy measures to address excess market liquidity and speculative tendencies, including an increase in the bank policy rate and statutory reserve requirements.
While these tightening measures aimed to instill market discipline, they inadvertently led to payment gridlocks and tight liquidity conditions, posing a risk to economic activity.
To mitigate the unintended consequences and strike a balance between financial stability and economic growth, the RBZ established the TFF.
The facility, with a maximum allocation of ZiG600 million, is funded by banks’ statutory reserves held at the central bank.
It aims to resolve liquidity bottlenecks while simultaneously encouraging bank lending to productive sectors.
To ensure responsible allocation, banks conduct thorough due diligence with their customers, ensuring that only genuinely productive activities receive funding.
The TFF is designed to increase the flow of credit to productive sectors like agriculture, manufacturing, and mining, which are crucial for economic growth.
It aims to support Zimbabwe’s projected 6 percent economic growth in 2025 by providing working capital to these key sectors.
The facility is implemented within the framework of a tight monetary policy, ensuring that liquidity is managed efficiently without causing inflationary pressures.
It redistributes existing liquidity within the banking system, directing funds from banks with excess liquidity to those with viable lending opportunities.
TFF is financed from banks’ statutory reserves held at the RBZ, so there’s no increase in the overall money supply.
Funds are disbursed through commercial banks, which are responsible for assessing the creditworthiness of borrowers and monitoring loan performance.
Loans typically have a maximum tenure of 270 days, and banks on-lend at a maximum interest rate of 30 percent per annum.
