EIB to inject $135m

HARARE - The European Investment Bank (EIB) will inject nearly $135 million into Zimbabwe’s Small and Medium Enterprises (SMEs) sector, which has become a major employer in the country’s economy.

The sector is struggling to access lines of credit among other major challenges.

This comes as an EIB team was in the country on a week-long mission to assess funding opportunities, especially targeted at the private sector.

The team comprised of Rasmus Lauridsen (senior investment officer, responsible for Zimbabwe), Barbara Marchitto (senior economist responsible for the Sadc region) and Nathaniel Munetsi (business analyst for the Southern Africa region).

“We explored ways in which the bank would assist industry and commerce, with particular emphasis on small-to-medium enterprises, using gathered data on the country’s funding needs,” said Andrew Matiza, Zimbabwe National Chamber of Commerce (ZNCC)’s chief executive.

While Matiza could not disclose the amount EIB could give, sources close to the development said the bank will initially extend at least 50 million Euros ($67,6 million) worth of credit lines, which will be increased to a 100 million Euros ($135,4 million) over time.

“Although the officials were non-committal on the amount… meeting with them was a very good start,” said Matiza.

The world over, growth of small businesses has been openly encouraged as these are widely seen as engines for economic growth.

As such, SMEs development emerges as a key instrument in poverty-reduction efforts, particularly in Zimbabwe.

There have been some repeated calls for government to set up an SMEs bank in the country to finance green projects but liquidity challenges have stalled progress.

The majority of SMEs in Zimbabwe and in emerging markets have been less able or unable to exploit the benefits of empowerment and, to add to the situation, is frequently under pressure on the local or domestic markets due to unviable production methods and high cost of raw material.

“The EIB officials were impressed with the economic terrain in Zimbabwe and they promised to get back to us. The hurdle now is for them to convince the bank to release the funds,” said Matiza adding that elections might however delay the whole process.

“Everything being equal, we are likely to get the money after nine or so months,” he said.

It is estimated that SMEs and other informal trades currently employ over 80 percent of the country’s 12 million population.

Economic experts have said that despite the huge potential SMEs have to contribute significantly to the economy, the sector has struggled to get meaningful funding due to poor organisational structures, impractical business proposals and lack of collateral.

Earlier during the week the officials from the EIB held talks with the ministry of Finance on the $221 million the country owes the bank. - John Kachembere

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