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Philippe Van Damme

Molline Gagare Business Reporter
THE European Investment Bank (EIB) has pledged to extend direct lines of credit to local banks for on-lending to small to medium enterprises (SMEs) for medium term investment.

The pledge comes after the EIB visited Zimbabwe last month in a follow up mission of 2014.

The bank noted that the government has made great strides in payment of its external debt to international financial institutions.

EU Ambassador to Zimbabwe Philippe Van Damme told Chronicle Business the commitment by Zimbabwe to pay off its external debt was a giant step towards normalising business ties.

“The mission noticed some favourable developments, notably some significant reforms in the financial sector and the start of token payments by the government of Zimbabwe to the international financial institutions on its external debt arrears,” said Van Damme.

“This progress has been very much welcomed and the EIB is now envisaging the extension of a credit line to local banks for on-lending to the Zimbabwean SMEs for medium term investment credit.”

He said the EIB will send a delegation in the coming months to assess the performance of the financial sector and screen potential banks for the project.

“The EIB therefore plans to send a more technical team over the next months to make a more in depth assessment of the financial sector and a due diligence screening of some potential local banking partners,” Van Damme said.

He said a final decision will be made by the end of 2015 or early 2016 to determine the amounts that will be involved for the entire project.

“It’s only on this basis that a final decision can be made by the end of 2015 or early 2016. It therefore remains too early to provide more detailed information on the amounts involved, the nature of the eligible projects or the pricing of the credit lines,” said Van Damme.

If successful, the bid by the EIB to extend loans to local banks will bring relief to indigenous businesses who are struggling to acquire loans from banks due to the difficult economic conditions.