Last week, CABS received a $25 million loan facility from the African Development Bank (AfDB) for lending to the productive sectors of the economy. NewsDay business reporter Fidelity Mhlanga (ND) spoke to the CABS managing director Simon Hammond (SM) to get more insights about the facility and other pertinent developments at the financial institution. Find excerpts below:
by Fidelity Mhlanga
ND: What is your feeling after receiving the $25 million facility?
SM: We feel very honoured that CABS has been chosen and we are also pleased that the facility is a boost for the Zimbabwean economy in general. That’s probably more important. It’s a sign of confidence for the future of Zimbabwe.
ND: Which sectors of the economy are going to benefit from this loan?
SM: The main drivers of the economy, agriculture, mining and manufacturing. So I hope we will be able to provide in those areas.
ND: What are the payment terms and interest rates?
SM: It’s repaid in three-and a half years and in terms of the interest rate, it’s a commercial rate that hopefully makes it affordable for us to lend to our customers, obviously with a small margin, but makes it still affordable for them.
ND: What are the obtaining lending rates at CABS?
SM: All interest rates for financial institutions have been capped at 12% by the Reserve Bank of Zimbabwe (RBZ) since last year. So it really depends. What we and other banks did is we have adopted a risk-based approach to lending. So it really depends on the respect for an individual from that point, so it won’t be moved above from 12%.
ND: What is the current non-peforming loans (NPLs) ratio at your bank?
SM: We are sitting at 6%, that’s coming down quite substantially over the years. Obviously we would like to fall in line with the RBZ, which calls all banks to be below 5%.We have made good progress, we have moved from 8% to 6%.
ND: Which sectors constitute much of your NPLs?
SM: It’s across all sectors, remember a lot of our lending goes to individuals for mortgages and for instance when people lose their jobs that would constitute quite a higher percentage which does not necessarily come from a specific sector. We have seen all sectors running into problems from time to time mainly in mining and manufacturing.
ND: How capitalised is the bank at the moment?
SM: We are very well capitalised. RBZ wants all banks to have capital of at least $100 million by 2020, we met that I think two years ago. We are probably sitting at an amount of about $127 million of capital.
ND: Have you been lending to the small-to-medium enterprises (SMEs)?
SM: Yes, we do quite a lot of lending to SMEs. In particular, we look at value chain. We are working with bigger players. For instance, in agriculture, we have big companies that we are working with in sugar and milk production by trying to give finance downstream to outgrowers in those industries.
ND: Are you now accepting the 99-year farm leases as collateral?
SM: We are waiting to see the final 99-year leases that have been given to farmers, but certainly all indications are that we should be able to accept those. We have already made big inroads; we have a large lending proportion of our lending book already to agriculture even before that happens. We have done a lot to support the revival of agriculture in the last years anyway.
ND: How much did you lend to agriculture this season?
SM: It’s well over $100 million. Maybe a small proportion is for long projects like plantations that take some years but the majority is for rotational crops.
ND: What is the current uptake of the Budiriro Housing project?
SM: We have sold out close to 50% of the houses. I would say another 15%-20%, we have got people occupying the house on a rent-to-buy basis. Hopefully, they are going to keep up with the rentals so that within a year or so they will be able to convert that into a purchase of the houses.
ND: What has been the reason for the slow uptake of the houses?
SM: Affordability has been an issue when people are grappling with jobs and so on. But there have been some issues with services. We have to make sure that the access road was upgraded and subject to the rains giving us some space we must have that complete. We had some issues with getting electricity to some of the houses. Although the electricity was connected, there has been some issues in acquiring some meters, but again, I think we have pretty much overcome that.
ND: What have you done to address the slow uptake of houses?
SM: We have lowered the deposit to 10% and effectively to 0% deposit if you are to come on a rent-to-buy scheme.
ND: Have you received lines of credit from other institutions?
SM: We have received lines of credit from Proparco and Shelter Afrique which we have serviced so well over the years, so this is further development in trying to mobilise particularly foreign currency for people who are desperately in need of it.
ND: How much did you receive from Proparco and Shelter Afrique?
SM: These facilities were in the range of $10 million to $15 million each and were longstanding and we have since repaid a substantial amount and we are left with little amounts. We also had a facility with PTA bank of about $25 million which we have drawn down and renewed three times over seven years.
ND: When did you receive the PTA facility?
SM: Probably initially back in 2011 something like that and we have drawn down the full amount each time and have repaid and renewed from time to time