The African Development Bank (AfDB) has approved a US$15mn funding deal for Zimbabwe’s First Capital Bank, which will use the proceeds to provide trade finance to SMEs and women-owned businesses.

The package includes a US$7.5mn direct line of credit and another US$7.5mn facility for guarantees to overseas confirming banks, covering non-payment risk taken on First Capital’s trade finance transactions with SMEs.

The AfDB says the financing “will provide the much-needed hard currency financing to support First Capital Bank to close its trade finance gap and expand its trade finance support for SMEs and local corporates in Zimbabwe”.

Foreign currency shortages have been a perennial problem in cash-strapped Zimbabwe, where the population mostly use US dollars following a series of failed sovereign currencies over the past two decades.

The global trade finance gap, estimated to be US$2.5tn, is also severe in Sub-Saharan Africa, where SMEs struggle to access trade finance from banks. Experts have called on development finance institutions, such as the AfDB, to play a bigger role in helping commercial lenders provide finance to smaller companies.

The AfDB says the package, which was approved on April 30, will help spur Zimbabwe’s inter-African trade and will “catalyse” some US$146mn in trade over the next three years.

“The facility is expected to support the importation of strategic commodities and promote the integration of Zimbabwe’s economy into regional and global trade markets, which are essential for the country’s growth,” says Moono Mupotola, the AfDB’s Zimbabwe country manager.

Tapera Mushoriwa, CEO of First Capital Zimbabwe, says: “The package aims to bolster our trade finance services in Zimbabwe, across Africa, and globally.”

First Capital was known as Barclays Bank until 2017, when the Mauritius-headquartered First Capital group bought the UK lender’s majority share in the bank. The group operates commercial banks in several other southern African countries.