Analysis of the impact of the targeted finance facility on business competitiveness

The facility has been objectively set up to finance working capital requirements of the borrowers to increase and improve productivity.

The TFF Operational Modalities and loan Characteristics

The facility will be availed through the normal banking channels. The Reserve Bank will lend collateralised loans to the banks, which will, in turn, lend to their customers which is the productive sectors in this case.

The banks will perform the credit risk of the beneficiaries implying that banks will be fully responsible for credit assessment and customer due diligence.

The lending banks are fully accountable for the way funds are utilized by the borrowers (fully responsible for ensuring that the funds are applied for the purpose for which they were borrowed) and are therefore expected to monitor the performance of the borrower throughout the loan tenure.

Funds are only disbursed to the lending banks upon the submission of a drawdown list indicating the names and loan amounts of the ultimate beneficiaries. This implies that funds will not be readily available for lending.

All the loans disbursed under this facility will be in ZiG and borrowers can repay in ZiG or in foreign currency at the ruling exchange rate.

The maximum tenure for the loans under this facility shall be 270 days running from the disbursement date.

The banks will borrow from the central bank at an interest rate of 20% per annum and on-lend at a maximum all-in interest rate of 30% per annum. The interest rate is subject to review by the Monetary Policy Committee (MPC).

If funds are found to have been abused by the borrower, the full loan amount becomes immediately due and payable. The loan will attract a penalty interest rate equivalent to the prevailing overnight accommodation rate for the duration that the loan was outstanding. The penalty will be levied on the borrower through the lending bank.

For more details, please visit the link below:

Analysis of the impact of the targeted finance facility on business competitiveness