RBZ unveils another 'looting scheme'

The Reserve Bank of Zimbabwe (RBZ) has introduced the Targeted Finance Facility (TFF) with an aim to provide affordable credit to key productive sectors such as agriculture, manufacturing, and mining. The initiative, unveiled alongside its operational modalities, seeks to bridge the gap left by commercial banks' limited capacity to fund these sectors adequately.

The TFF offers loans with a maximum annual interest rate of 30 percent for customers, significantly below the average corporate lending rate of 43 percent, as noted by the Monetary Policy Committee (MPC). Banks can borrow from the RBZ at a preferential rate of 20 percent per annum, ensuring a lower cost of credit for end users.

TFF loans have a maximum maturity of 270 days and must be fully repaid by the due date or earlier. Borrowers can access funds in Zimbabwe Gold (ZiG) and have the flexibility to repay in either ZiG or foreign currency at the prevailing exchange rate.

To ensure affordability, the RBZ has capped the all-inclusive interest rates and prohibited additional charges. Interest rates under the facility will be reviewed periodically by the MPC to maintain a balance between affordability and risk management.

The RBZ has implemented stringent collateral requirements for banks, which can be backed by assets such as Gold-backed Digital Tokens, Treasury bills, foreign currency, or other central bank-approved instruments.

"Banks will take the credit risk of the ultimate beneficiaries and should therefore do thorough credit assessment and customer due diligence," the central bank stated.

Disbursement of funds is contingent upon the perfection of collateral, a process the RBZ has committed to completing within 72 hours for standard securities.

Lending banks are tasked with monitoring borrowers to ensure funds are used for approved purposes. Misuse of funds will result in the immediate repayment of the loan, alongside a penalty interest rate equivalent to the prevailing overnight accommodation rate.

Banks failing to enforce proper utilisation of funds risk suspension from the TFF, while overdue loans will also attract penalties. Regular quarterly performance reports are required to ensure compliance and transparency.

With Zimbabwe's economy projected to grow by 6 percent in 2025, the TFF is expected to play a pivotal role in ensuring adequate working capital for productive sectors, driving economic growth.

Economic analyst Namatai Maeresera lauded the initiative, saying:
"Through providing targeted support to productive sectors, the facility aims to drive economic growth while ensuring financial stability. The initiative is a significant intervention, particularly in a context where limited access to affordable credit has stifled business expansion."

The TFF marks a strategic effort by the RBZ to bolster the nation's financial ecosystem and stimulate growth in critical sectors, fostering both stability and expansion.