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Commercial Farmers' Union of Zimbabwe

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Time Bank offers govt US$5 billion facility

Time Bank offers govt US$5 billion facility

Friday, 15 July 2011 08:13

Reginald Sherekete

TIME Bank of Zimbabwe Ltd has submitted an innovative proposal for a US$5 
billion syndicate loan facility to government to pay restive civil servants 
and settle Zimbabwe dollar deposits trapped in the financial system.
The bank, which has re-invented itself from being a commercial bank to an 
investment bank, submitted the proposal to the Ministry of Finance last week 
on the strength that the facility would resolve some of the country’s 
multifaceted economic challenges arising as a result of the introduction of 
a multi-currency system in February 2009.

The 25-page proposal in the possession of the Zimbabwe Independent was sent 
to Finance minister Tendai Biti’s office and copied to Nelson Sambureni, the 
chairperson of the National Joint Negotiating Council. The council comprises 
of government proxies and representatives from all the civil servants’ 

The proposed syndicate loan is based on the creation of what Time Bank 
called the 4th money (near money), which is part of the proposed M4 category 
of money. The 4th money created by the bank will be additional money supply 
from intended time deposits and will be linked to gilt-edged bonds offered 
by government on the back of the loan. Technically, 4th money is the 
securitised credit to government which is converted into time deposits with 

Currently, Zimbabwe has three distinct categories of money — M1 (liquid 
money comprising notes, coins plus all demand deposits), M2 (comprising all 
the elements in M1 plus all other short-term and medium-term deposits with 
banks with a tenor of less than 90 days) and M3 (combination of Ml, M2 plus 
all long-term deposits with banks with tenors less than six months).

M4 will utilise the function of money as a store of value and standard of 
deferred payments much more than its function as a medium of exchange.

The syndicate loan targets payment of better salary increases across the 
board to the country’s over 220 000 civil servants over a two-year period as 
well as the settlement of Zimbabwe dollars deposits that were trapped in the 
financial system when the country’s economy migrated into a multi-currency 

According to the bank, the objective is to competitively remunerate the 
civil servants without recourse to the risk-averse multilateral lenders and 
the facility would go a long way in lessening the government’s burden.

Civil servants have since dollarisation been threatening to strike over poor 
salaries, averaging about US$150 per month, US$350 less than the poverty 
datum line. Government has been pleading bankruptcy, saying its revenues 
were inadequate to meet the workers’ otherwise genuine demands.
The proposed syndicate loan, if accepted, would rope in government, a 
syndicate of banks led by Time Bank, Zimbabwe dollar depositors and civil 

Under the loan, the supplier of goods or services becomes the creditor or 
lender and the resultant supplier credit is securitised. The supplier credit 
loans are mobilised from suppliers of goods and services, including 
suppliers of labour services and such loans are then advanced to government.
Time Bank will act as a lead bank and mobilise participating banks to 
securitise the government debt and trade it on the inter-bank market, 
thereby improving liquidity on the inter-bank market, which is currently 

To activate the process, according to Time Bank, the civil servants or the 
Zimbabwe dollar depositors would be required to open a time deposit account 
with any of the participating banks.

After a syndicate loan has been signed, the Zimbabwe dollar depositor or the 
civil servant would have his/her account credited as part of the settlement 
plan. The said credit would constitute disbursements to which the government 
will acknowledge its indebtedness by issuing Promissory Notes (Treasury 
Bonds) physically or electronically to Time Bank.

Inadvertently, the syndicate loan becomes the financiers while the 
government becomes the debtor. In other words, the government would have 
fully honoured its obligations to the civil servants and Zimbabwe dollar 
depositors once this has been done and will now be indebted to the 

The terms of the syndicated loans include a tenor period of 10 years with 
interest payable half-yearly at an interest rate of 8% per annum.  The loan 
is subject to an arrangement fee of 2% and an annual syndicate management 
fee of 0,5%.

A sinking fund will be set up by government with the lead bank where 
deposits will be made into the account over a 10 year period in preparation 
for settlement of the 10 year treasury bills/ bonds. The fund will earn 
interest of 5% per annum and can be used to redeem TBs should a holder opt 
for early payment.

Civil servants or the Zimbabwe dollar depositor would be able to withdraw 
from the facility as and when cash becomes available at each bank. But 
pending such withdrawal, the beneficiaries would earn a 5% interest per 
annum on their balances.

The bank said the syndicate loan is the only practical solution towards 
rewarding civil servants as well as restoring property rights of people who 
have not been paid their Zimbabwe dollar deposits in banks.

“In other words, the solution restores the property rights of big and small 
investors, including ordinary people who may be vulnerable during the 
implementation of various economic measures. Hence the solution improves 
confidence in the banking sector and the country in general,” the bank said 
in its executive summary.

“In the final analysis, it may result in more cash circulating in the formal 
economic sectors as ordinary people deposit more money in banks instead of 
keeping it in the informal sector.”

The bank described the syndicate loan as feasible, affordable and 
appropriate innovation that can stimulate the country’s economy.

“People who can supply their goods and services on credit, in an illiquid 
environment are the source of economic turnaround, and the syndicate loan 
harnesses such efforts by ordinary people, ordinary creditors, into a big 
positive economic force,” said the bank as part of its recommendation.

In order to avoid the emergence of a parallel market, Time Bank proposed 
that the resultant treasury bonds should be issued to banks only and they 
should not be issued to non-banks or members of the public.

Time Bank said the loan will enable growth with equity. Civil servants, the 
bank said, could use their time deposits as security for personal loans.


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