The Reserve Bank of Zimbabwe (RBZ) has outlined the operational details of its new Targeted Finance Facility (TFF), offering banks a borrowing interest rate of 20 percent from the central bank, while the rate for on-lending to customers will not exceed 30 percent.
The facility aims to address the gap in financing for productive sectors, as commercial banks have been struggling to provide sufficient support. This challenge could hinder economic growth, particularly as the country expects a 6 percent GDP growth in 2025. Sectors such as agriculture, manufacturing, and mining are the main beneficiaries of this initiative.
TFF loans come with a maximum maturity period of 270 days, and borrowers are required to repay in full by the due date or sooner. The funds can be accessed in Zimbabwe Gold (ZiG), with the option to repay in either ZiG or foreign currency based on the prevailing exchange rate.
The RBZ has set an interest rate structure that balances affordability for borrowers with responsible risk management for lenders. Commercial banks will be able to charge customers up to a maximum of 30 percent annually, which is lower than the typical corporate lending rate of 43 percent per annum. Importantly, no additional charges beyond the agreed interest rates will be allowed.
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Collateral requirements for loans under the TFF are strict, with banks needing to provide acceptable security. This may include assets like foreign currency, Gold-backed Digital Tokens, short-term Treasury bills, or any other collateral approved by the RBZ.
“The banks are responsible for assessing the creditworthiness of borrowers and conducting due diligence on their clients,” the RBZ stated. The central bank also emphasized that loan amounts and repayment terms must be aligned with the business cycles of borrowers to ensure maximum impact.
Disbursement of funds will only occur once collateral is finalized, with the RBZ aiming to complete this process within 72 hours for standard securities. Lending banks are tasked with monitoring the use of funds, and they must submit quarterly performance reports to the RBZ. If funds are misused, the entire loan becomes due immediately, with penalty interest charged at the prevailing overnight accommodation rate.
Lending banks that fail to ensure proper use of funds may face suspension from the facility. Any overdue loans will also incur penalty interest to maintain discipline within the system.
Economic analyst Namatai Maeresera views the TFF as a strategic effort by the RBZ to fill a significant gap in Zimbabwe’s financial sector. “By targeting key sectors like agriculture and manufacturing, this facility aims to spur economic growth while ensuring the financial system remains stable,” Maeresera said.
