USDs dominate First Capital Bank’s asset book
FIRST Capital Zimbabwe says its asset book has been growing in USD terms and this, according to the bank, is a signal of a market pressing for dollarisation. Said the bank’s commercial director, Mutemwa Ushewokunze; “I would argue that our balance sheet is now moving into a dollar position and it is just a sign of the times.”
He said the increasing foreign currency deposits ratio to total deposits was an indication that people were now hedging by stocking US dollars in response to “inconsistent government policies.”
Ushewokunze told Business Weekly that the bank was seeing a growing demand in USD loans that meant deposits for foreign currency were also on the rise.
According to Ushewokunze, the loans were being disbursed at an interest rate of 13,5 percent.
“From what we can see is a strong pipeline of clients looking or seeking for dollar loans, which naturally means our dollar deposits and liabilities are going to rise,” Ushewokunze said.
First Capital has since seen an increase in foreign currency deposits since Government issued a directive stopping banks from lending as customers are now trying to insulate themselves from policy inconsistency despite high transactional costs.
He added that; “I think naturally when you have a policy speed bump, the inclination is for the economy to dollarise, what we have experienced since the ban on lending started and was lifted was an increase in USD deposits and we expect the trend to continue.”
First Capital has had a strong loan book in the past year and seems to be inclined to agriculture funding, which the bank thinks are the backbone of production and should be a priority for development.
Ushewokunze said their bias is very developmental and they believe that if they solve the first part of the value addition puzzle, it becomes easier to solve the second part which is the value addition itself.
“For us it is a mix between those that produce for the domestic market and those that produce for the export market because critically, export proceeds are a value for us as an organisation but very important for the country in general,” Ushewokunze explained.
As a result of that the bank pays a lot of attention towards providing facilities in the primary agriculture spaces. Collateral has always been a problem for a number of Small to Medium Enterprises, as they fail to secure funding as they lack immovable property to secure the needed coverage. However, First Capital says it believes there are many ways to secure collateral with the product itself being one.
According to Ushewokunze; “The bank feels there is a lack of understanding within the banking sector because there are ways to provide financing or coverage without being overly onerous in terms of the security requirements and such. Your product itself can be security and there is an offtaker, if they can give you comfort that they are going to buy that product, if you lock all those pieces together it becomes easy to provide finance into that space.”
“Zimbabwe is currently experiencing a property boom and that for better or worse is being used as an inflation hedge.
“From a state level we have seen a lot of infrastructure investment going through, a lot of roads being constructed and civil works going on and we expect that to continue,” Ushewokunze said.
The bank is willing to engage with the companies that are winning tenders of road and dam construction as Government has been paying timeously.
“Critically for us it provides us the opportunity to fund some of these construction firms that have won these tenders and ultimately will be facing government as it is the final funder but for the most part we understand it is paying.
Yes, there might be slight delays but they understand the important need to deliver on these infrastructure projects otherwise the dilapidation of bridges and roads becomes a serious problem.”