NMBZ seeks offshore credit lines

HARARE - Ambitious financial institution NMBZ Holdings is seeking offshore credit lines from international financiers to bolster its chances of meeting the $100 million minimum capital requirements.

“Due to the indigenisation regulations, we can no longer have more investors coming in as we have already reached the required 49 percent foreign ownership. The only option we have is to seek offshore credit lines,” said James Mushore, group chief executive officer.

This comes after NMBZ recently sealed a $16,4 million debt-equity deal with three foreign investors who bought a 26,79 percent stake in the London Stock Exchange and Zimbabwe Stock Exchange-listed company.

The new investors —AfricInvest, Norfund and FMO — each injected $5 million for a total of 103 million shares while Norfund advanced a further $1,4 million as a line of credit.

Subsequent to the latest deal, the top five shareholders in NMBZ are African Century NNR (17,05 percent) Old Mutual (14,79 percent), AfricInvest, Norfund and FMO each holding 8,38 percent respectively.

The fresh capital injection is expected to increase the group’s flagship arm — NMB Bank — capitalisation to about $43 million as the bank rushes to reach the regulatory minimum of $50 million by June 2013.

The Reserve Bank of Zimbabwe initially wanted commercial banks to increase capital, in phases, to $100 million by June 2014, but recently indicated that it might relax the conditions and extend the deadline to 2020.

Mushore noted that the bank has not been able to get into productive sectors in a meaningful way because its current capital was not adequate to attract large credit lines and is hoping the relationship with the new investors will be able to assist them to get longer facilities.

“We will soon be going to financial institutions in Europe whom we believe will be able to assist us,” he said.

Mushore said the credit lines will also assist in heightening the bank’s liquidity in light of prevailing cash challenges on the local market, although he could not be drawn to divulge how much the financial institution is seeking.

“That’s the function of political risk. It depends on how international financial institutions view our politics, but I think with the progress we have made in terms of the referendum and the constitution we will be  able to get more funds from outside,” he said.

Zimbabwe has for the past few years struggled to get credit lines due to its high country risk, resulting in acute liquidity challenges in the economy.

Financial results published by financial institutions indicate that banks are reluctant to fund the productive sectors of the economy due to lack of long-term financing. Zimbabwe’s banking sector, like many other sectors of the economy, is still recovering from the after-effects of a decade long economic crisis.

By end of last year total deposits in the country were estimated at $4,4 billion and more than 80 percent of the funds are controlled by the four major banks.

Market analysts contend that the structure of the country’s banking sector remains tilted towards short-term financing, accounting for over 90 percent of total deposits.

Comparatively, deposit rates particularly for short-term deposits have generally improved, reflecting the banks’ efforts to mobilise non-transitory deposits. - Business Writer

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