Zimbabwe: Receivables Financing Platform Boon for Local Firms

The Zimbabwe Stock Exchange (ZSE) is forging ahead with moves to broaden the country’s capital markets, with the latest joint venture (JV) agreement between the bourse and Harare Receivables Exchange (Private) Limited (HRE) creating impetus for the setting up of a receivables financing platform.

‘Accounts receivable financing’ is a type of financing arrangement in which a company receives financing capital related to a portion of its accounts receivable.

The establishment of a receivables financing platform in the country is likely to go a long in helping local firms raise much-needed capital for operations and expansion projects.

Capital markets investments typically cover a wide range of products. But locally, the capital market is not that well developed and is dominated by shares.

In an earlier interview, Securities Exchange Commission of Zimbabwe (SECZ) chief executive Tafadzwa Chinamo, said it was actually the constrained performance of the broader economy that had undermined local capital markets.

“In the Zimbabwean scenario, it is infact the depressed economic performance that has contributed to the general underperformance of the local capital markets.

“With low capacity utilisation, company closures, high unemployment and economic fundamentals pointing southwards and low disposable income brought about by poor economic performance, the local capital market has found it difficult to mobilise savings from the public and channel them to the country’s productive sector, hence lack of provision of long-term capital,” said Chinamo.

“This has also led to thin trading and low level of liquidity. It is also crucial to note that stock prices are not solely driven by economic fundamentals but by a function of other non-economic factors such as emotions, cognitive psychology and expectations.”

But the move to broaden the capital markets could help change the game, especially for capital-seeking small firms.

The JV between the ZSE and Harare Receivables Exchange follows a Memorandum of Agreement that was signed between the two parties last December.

Said ZSE chief executive officer Justin Bgoni:

“The ZSE looks forward to working with HRE in providing working capital solutions to Micro, Small and Medium Enterprises (MSMEs).

“MSMEs continue to face challenges of limited access to finance and the receivables financing platform will enable them access to working capital on competitive pricing.

“This is in line with the Governments’ National Financial Inclusion Strategy as well as the ZSE mandate of providing capital and risk management solutions to businesses.

“The proposed financing model has been successfully implemented in Asia and Latin America. The success stories are on the basis that receivables financing through a formalised marketplace reduces the risk for potential financiers. The ZSE is excited to be working with HRE on this project, which will ultimately deepen our financial services sector.

Harare Receivables Exchange is a trade finance company specialising in providing an advance or a line of credit secured against outstanding invoices, the company helps to solve cash flow issues, created by payments terms on invoices, so that after a business has provided a good or service they have to wait to be paid.

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