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NewsDay

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‘Zim has market for debt instruments’

Business
MICRO-FINANCIER Untu Capital has introduced a $5 million bond called U-Gain that will trade on the alternative trading platform, the Financial Securities Exchange (Private) Limited (Finsec).

MICRO-FINANCIER Untu Capital has introduced a $5 million bond called U-Gain that will trade on the alternative trading platform, the Financial Securities Exchange (Private) Limited (Finsec).

By TATIRA ZWINOIRA

U-Gain is a retail debt instrument issued by Untu Capital to raise capital from the market. NewsDay (ND) business reporter Tatira Zwinoira sat down with Untu Capital chief executive officer Clive Msipha (CM) at their analysts briefing on Wednesday to discuss more about this debt instrument and how it works. Find excerpts below:

ND: What is this debt instrument which you were talking about?

CM: It is a note that we are issuing. An organisation or a company uses two main instruments to raise capital, equity and debt, so this is a debt instrument.

ND: You said this debt instrument is going to work on mobile phones. Can you explain how?

CM: What we are seeking as an organisation is to raise $5 million, so the first $1 million is debt that we are getting from the market, so people are investing in our debt over 12 months at an interest rate of 9% per annum.

We have opened a number of channels for that particular $1 million tranche. Individuals can participate for as little as $50 using a mobile phone, so the channels that we have opened up are TeleCash together with EcoCash.

EcoCash will be active in the coming days. I might not be at liberty to give you the exact date, but what I can tell you is that in the next few days, EcoCash will be active.

ND: So basically, with this debt instrument, you are sourcing out money from the market to buy into your $5 million debt?

CM: Okay, so what we are doing is borrowing from the market and then we are paying the market a return for the debt. The return we are offering is very solid, compared to the return that is actually out there.

For example, if you place money in a bank account and compare that return to what you are getting from your deposit, when you compare the two, our return is very strong at 9% per annum.

So, at the end of the 12 months, the individual will get their interest back, together with the money that they would have invested with us or loaned to us.

ND: How is Finsec involved in this debt instrument?

CM: Finsec is providing the platform after we have issued out the instrument and an individual has invested. Let us say, for example, you subscribe to the instrument and give us $1 000 on Finsec for the Untu bond, what happens is that Finsec provides the trading platform before the end of the 12 months.

ND: So when I am buying into the debt instrument, I am putting $1 000 into it?

CM: Correct.

ND: And when I am selling, I can only sell it after 12 months?

CM: Well, Untu is obliged to pay you after 12 months.

ND: You cannot access any funds within those 12 months?

CM: You can by selling it on the market (Finsec).

ND: Suppose I buy $1 000 into the debt and I put it up on the market with a margin, who determines the margin, is it the market or an investor?

CM: It is market determined. You can maybe say you want a return and the market will not give you, so no one will be able to be on the other side of the trade.

ND: The Finsec market gives you the suggested return?

CM: It gives you suggestions, but you can put what return you are looking for. For example, if you invested $1 000, you can go to the market and say I want

$1 100, but maybe the market can only give $1 050, so the trade won’t clear. But, if you say you want $1 050, you get your $50.

ND: Do you think that Zimbabwe has a market for debt instruments?

CM: I think there is a market. There is certainly a need to develop that market. The market is in its infancy, especially the one for listed bonds, but like a number of other countries it is a very big avenue for development.

So companies go to the market and issue out bonds, people invest in these bonds, it is a market that is developing in Zimbabwe and I think the Finsec platform will allow for this growth to come through.

ND: You talked about these international players that are involved who are backing some part of this debt instrument. Can you explain what exactly they are backing?

CM: Sure. Since the investors are lending money to Untu Capital we have a guarantor who guarantees that in the event we fail to pay the $5 million, they we will be able to pay 50% and the ones who are doing that is the African Guarantee Fund.

ND: And the other 50%?

CM: Untu has properties that they have placed with ZB Bank, so they are representing the interests of all investors.