ZIMBABWE’S biggest mortgage lender says it has clinched deals with correspondent banks to expand its scope of interventions, as it scales up forays into the private sector.
Correspondent banks provide services to other banks, usually in another country.
They act as an intermediary or agent, facilitating wire transfers, conducting business transactions, accepting deposits and gathering documents on behalf of another bank.
Correspondent banks are most likely to be used by domestic banks to service transactions that either originate or are completed in foreign countries.
Zimbabwe has been deserted by scores of correspondent banks.
CABS Bank said this week it had a hectic first half to June 30 2022, inking deals with three financial institutions, which have unlocked “both inward and outward international payments for individual customers and not only corporates as before”.
“We have a reasonably balanced portfolio of correspondent banking relationships with EIB SA Groupe, Ecobank, Paris, to extend support for both inward and outward international payments for individual customers and not only to corporates as before,” CABS managing director Mehluli Mpofu said as he shared results for the review period with investors.
“To facilitate trade by local businesses, the society arranged an Aftraf (Afreximbank trade facilitation) of US$20 million with Afreximbank, which will enable businesses to access and utilise letters of credit. We also arranged a US$7,5 million AfDB (African Development Bank) trade facilitation guarantee. Businesses intending to import can avail a guarantee drawn against this facility to their suppliers, and we provided loans to various businesses in support of their value chains,” the CABS MD said.
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A letter of credit is a letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. In the event that the buyer is unable to make a payment on the purchase, the bank will be required to cover the full or remaining amount of the purchase. It may be offered as a facility.
Last year the European Investment Bank unveiled a €15 million (US$18 million) seven-year facility to CABS to bolster its capacity to bail out thousands of firms that have been affected by Covid-19.
CABS also arranged a US$7,5 million AfDB trade facilitation guarantee.
It also arranged a US$20 million Aftraf programme which will enable businesses to access and utilise the letters of credit.
The society’s inflation adjusted operating income rose by 91,6% to ZW$18,42 billion (about US$33,9 million) during the period under review.
“Operating income amounting to ZW$18,42 billion was however eroded by the effects of hyperinflationary as the monetary loss increased to ZW$9,97 billion (about US$18,3 million) from ZW$1,16 billion (about US$2,1 million) for the same period last year. The society was complaint with the Reserve Bank of Zimbabwe’s capital and liquidity requirements throughout the period under review. Capital perseveration remains a priority to maintain and grow shareholder wealth,” the CABS boss noted.