eBusiness Weekly
Michael Tome
NMB Bank says the terms and conditions of the recently availed lines of credit from external financial institutions, have catapulted the number of loan applications from the local clientele.
Gerald Gore, the NMB chief executive officer, said this at the US$10 million line of credit facility signing ceremony with the Trade and Development Bank (TDB).
The facility extended by TDB came barely four months after NMB received a €12, 5 million line of credit from the European Investment Bank (EIB).
EIB loan came with a seven-year tenure while the TDB loan has a three-year tenure.
Zimbabwe holds enormous potential to grow its supplies to global markets with horticulture and manufactured produce, but several players have struggled due to a dearth of long-term and cheap funding to expand their capacities.
Funding limitations have principally been due to a financial sector that does not have flexible conditions when granting agriculture related loans, let alone long-term financing.
A number of horticulturists have since resorted to companies that offer contract farming to small and large scale farmers, which is seen as more profitable and sustainable.
NMB facilities thus come as an lucrative opportunity for the local clientele to access long-term funding. The funding is mainly meant for working capital requirements and for farmers who intend to set up additional facilities to boost their exports.
It is meant to support the entire horticulture chain, given that the bank is also part of banks that will be disbursing the US$20 million horticulture revolving fund, which was recently launched by the Treasury.
“In June we had a €12,5 million line from a European Investment bank that has seven years tenure with a two-year grace period that is also supporting exporters. I would say as of now we have effectively exhausted the line when I look at the pipeline and customers that have applied.
“This money is coming at favourable terms, I tell you one of the challenges in this market is how customers struggle to access long-term funding, this is why we have been going for lines of credit because they come at fairly reasonable terms, and also they are fairly long term,” said Gore.
He said the facility’s support which cuts across the whole horticulture chain from growers of flowers, peas, citrus, and blueberries has noticeably been growing the capabilities of the sector.
“We believe that the best way to support exporters is by looking for money that is fairly long term so they can plan and increase capacity without pressure, we go for these lines because they have a real impact on our customers compared to short term money.
“Resultantly we have seen growth, as most of the customers we are supporting have been increasing their capacity,” he said.
NMB is on record saying that it would continue to look out for more lines of credit to satisfy the huge demand coming from its exporting clientele.
Recently the Wattle Company bemoaned lack of cheap and long-term capital from local financiers saying it was choking the sustenance of its operations as the forestry industry requires lengthy periods to realise returns.
Operations according to The Wattle Company are also hampered by local banks’ high cost of finance which the company said is a deterrent to borrowing working capital.
According to Dr Maxwell Mutema, an agriculture practitioner, responsible authority should work on coming up with policy framework or structures designed to enhance horticulturists’ eligibility to access long-term funding if the country is to realise tangible growth from this lucrative industry.
“I think it is on policy plan that we have a big elephant in the room, otherwise there is a lot of money out there which is willing to come into this country especially to support export horticulture, high-value horticulture, and value addition to horticulture,” said Mutema.
Long-term financing provides businesses with a more stable debt management instrument than short-term loans.
It also allows borrowers to have more security when budgeting for costs and expenses as the time period of financing is fairly long and there is no need to repay back at a shorter period.
