RBZ scales up push for SME funding

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THE Reserve Bank of Zimbabwe (RBZ) has scaled up efforts to avail funding for private sector operations to boost the economy, according to the bank’s governor, John Mangudya.

He told bankers during presentation of the February 2020 Monetary Policy Statement on Monday that the central bank’s Monetary Policy Committee (MPC) agreed to increase financial support to companies under the window to $1,5 billion, from $1 billion.

The central bank governor encouraged banks to push a significant amount of this support to small to medium scale enterprises (SMEs), in line with a government strategy to build a strong SME sector.

This is critical to address high unemployment rates in Zimbabwe estimated at over 90 percent, after extensive de-industrialisation as a result of ongoing economic challenges.

A programme called the medium-term bank accommodation (MBA) has been established by the RBZ to spearhead banks’ interventions into the private sector, Mangudya said.

He noted that out of a $1 billion target, $800 million was deployed into productive sectors at the end of last year.

“At its meeting on 14 February 2020, the MPC agreed to review the limit under MBA window to $1,5 billion in order to cater for the winter agricultural preparations,” the RBZ chief told bankers.

“Banking institutions are encouraged to re-orient their lending portfolios to the productive sectors of the economy. Banking institutions are encouraged to partner with the private sector across the value chains, as part of the strategy to increase productivity and export earnings in the national economy. Financial institutions are expected to increase their support to the micro, small and medium enterprises (MSMEs) in order to deepen financial inclusion,” said Mangudya.

He said increased support to MSMEs would promote value addition through diversification, export earnings and import substitution, which are all critical for increased economic output.

“In this regard, banking institutions and microfinance institutions are required to submit to the bank (RBZ) detailed strategies to support the productive sector during the period 2020-2021,” said Mangudya.

Recipients of the funding would access it at interest rates of between 15 percent and 18 percent.
Funding to productive sectors was among a series of measures announced under the MPS, among them maintaining a contentious foreign currency retention system that has been blamed for draining liquidity out of exporters.

Under the system, the RBZ retains a portion of export proceeds earned by firms and gives them the Zimbabwe dollar equivalent at the prevailing official exchange rate.
The RBZ assured exporters and other individual and institutional holders of foreign currency accounts that their funds are safe.

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“The bank would therefore like to reassure all holders of free funds that their funds are very safe and secure in Zimbabwe,” the central bank chief said when he presented the monetary policy statement on Monday.

“The same is true for all other foreign currency accounts and that the current export retentions are being maintained at their current levels. The bank has therefore no appetite at all to tamper with the legal status of the public’s foreign currency accounts,” he noted.

The central bank left its benchmark interest rate at 35 percent, citing moderating inflation, as it looks to print more local currency and limit the use of foreign currencies in order to promote Zimbabwe’s currency.
The domestic unit was introduced last year, after being decommissioned in 2009 due to hyperinflation.

“Our task is we stabilise inflation and stabilise the exchange rate. We expect month-on-month inflation will continue to come down until the end of the year,” Mangudya said.

“Most of the inflation is caused by non-monetary factors. That is expectations – that ‘I lost money in 2008’,” Mangudya said.

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