HARARE – The Reserve Bank of Zimbabwe (RBZ) has unveiled a Targeted Finance Facility (TFF) aimed at tackling liquidity challenges in the banking sector while bolstering the country’s productive industries, Business Weekly has reported.
The facility, which will be distributed through commercial banks, is designed to provide working capital without increasing money supply, a move that has sparked debate among experts.
In a statement, the RBZ said: “The Targeted Finance Facility is specifically being set up to finance working capital requirements of the borrowers to increase and improve productivity. It will be availed through normal banking channels, with banks responsible for vetting and assessing the viability of the ultimate borrowers.”
Liquidity Challenges in Focus
Zimbabwe’s financial sector has faced severe liquidity constraints, particularly in the local currency (ZiG). Speaking to The Business Weekly, banker Raymond Madziva described the TFF as a critical intervention.
“Banks are struggling with local currency liquidity. The TFF is a necessary intervention to bridge the funding gap, especially as banks cannot meet the funding needs of businesses in the productive sectors,” he said.
Madziva added that the facility could unlock much-needed funds for key industries, helping the Government achieve its 6 percent economic growth target in 2025.
Expert Perspectives
Monetary economist Dr Misheck Nzou warned that the facility might put short-term pressure on the local currency.
“We are likely to see depreciation of the ZiG as companies rush to access the facility,” said Dr Nzou, who noted that increased demand for foreign currency to meet working capital needs could weaken the local currency.
However, he also highlighted the long-term potential of the TFF. “If the funds are channelled toward productive investments, we could see a more stable economy in the second half of the year,” he added.
Economist Gladys Shumbambiri-Mutsopotsi offered a different view, pointing out that the facility could stabilise banks holding local currency Treasury Bills (TBs). “Many banks have TBs that were likely to be restructured following Treasury’s budget pronouncements. The TFF provides an alternative liquidity source, which could stabilise their operations,” she explained.
Terms and Implementation
The TFF comes with strict terms to promote responsible lending and borrowing. Banks will borrow from the RBZ at a 20 percent annual interest rate and lend to businesses at a maximum of 30 percent. Loans will be fully collateralised, with acceptable securities including gold-backed digital tokens, foreign currency, and Treasury Bills.
The facility also sets a maximum loan tenure of 270 days, with repayments to be made in ZiG or foreign currency at prevailing exchange rates. Banks will assume full credit risk, requiring thorough due diligence before approving loans.
The RBZ has pledged to monitor loan utilisation closely, warning that misused funds will result in penalties. “If funds are used for purposes other than those approved, the full loan amount becomes immediately due and payable, with penalties imposed,” the central bank said.
Industry Reaction
The private sector has welcomed the TFF, viewing it as a lifeline for businesses struggling with high borrowing costs and liquidity shortages. Industry leaders expressed optimism that the concessional borrowing rates—capped at 30 percent—will ease financial burdens and boost productivity.
“The concessional rates are a relief for businesses that have struggled to access affordable credit. If implemented well, this facility could significantly improve productivity and competitiveness in key sectors,” a source close to the Confederation of Zimbabwe Industries (CZI) told The Business Weekly.
A Delicate Balancing Act
The RBZ faces the challenge of stimulating growth without triggering inflation. By ensuring that the TFF does not increase money supply, the central bank aims to maintain monetary stability while supporting economic recovery.
Dr Nzou emphasised the importance of responsible fund utilisation. “This facility has the potential to transform the productive sectors if implemented effectively. The key lies in directing the funds toward projects that generate sustainable economic growth,” he said.
With the TFF now in motion, stakeholders will be closely monitoring its rollout and impact on Zimbabwe’s economy. The initiative is expected to play a pivotal role in achieving the Government’s economic growth targets for 2025.
