CABS Secures US$7.5 Million Trade Guarantee From AfDB
OLD Mutual Zimbabwe’s banking subsidiary, CABS, formerly Central African Building Society has secured a US$7.5 million trade guarantee facility from the African Development Bank Group (AfDB).
A bank guarantee is a promise from a lending institution that ensures the bank will step up if a debtor can’t cover a debt.
This is one of the first approval for AfDB under its new transaction guarantee instrument which was formally launched in July 2021.
The three-year-long facility will provide guarantees of up to 100 per cent to international confirming banks against the non-payment risk arising from the confirmation of letters of credit and similar trade finance instruments originated by the CABS on behalf of its clients.
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In a statement, AfDB said the ultimate beneficiaries will be small and medium-sized enterprises and local firms, who rely on the building society to meet their trade finance needs. Read part of the statement:
Over the next three years, the facility is expected to support more than US$50 million in trade between Zimbabwe and the rest of the world. Lack of adequate credit lines from international confirming banks has restricted the building society’s ability to support its clients’ growth.
AfDB said the facility will support the importation of critical inputs such as agro-chemicals, pesticides, farm machinery and other intermediate goods that Zimbabwe needs to revive its agricultural and manufacturing sectors.
The facility marks the AfDB’s third non-sovereign intervention in Zimbabwe in recent years and the second to CABS.
In 2017, CABS received a US$25 million trade finance line of credit, which was accessed by its various clients operating in, among other sectors, agricultural value chain out-grower schemes with smallholder producers of macadamia nuts, and cotton, beef and dairy production.
The AfDB Group currently supports 15 initiatives in Zimbabwe valued at US$176 million. These include the rehabilitation of infrastructure in the energy, water and sanitation sectors, financed through resources from the ZimFund.
The statement said that the Bank also supports initiatives to improve governance and public finance management in the public sector.
Financial inflows into Zimbabwe dwindled at the turn of the millennium when the southern African country’s relations with Western countries and international financial institutions went south.
More: The Sunday News
