• Financial Services to Support International Trade

    16 Apr, 2005 – 9:00 am

    Foreign banks, especially Portuguese, and South African banks, dominate Mozambique’s financial system. Credit is limited, primarily because of limits on debt collection, the range of collateral, and credit information, but also because of underdeveloped financial institutions. Though bankable enterprises are underserved, the banking system is making progress in serving them and does not lack loanable funds.

    Two mechanisms could facilitate more bank lending: (1) structured financing agreements that distribute risk and minimize cost of lending and (2) a packaging facility that helps secure needed trade finance.

    Some other more modest steps could make the handling of credit information more efficient and thus increase the volume of credit and trade.

    In addition, a number of financial market entrants could benefit from USAID assistance and insurance services could be improved through a number of initiatives.

    Given the poor record of development and agricultural banks in the region and Mozambique, pursuit of such is discouraged. Lenders, however, are rapidly expanding their services to commercial farmers. Smallholders are benefiting from linkage schemes and microfinancing and could more effectively be assisted through more of the same.

    This report identifies and proposes financial sector interventions in Mozambique and the SADC Region that donors or private sector groups could undertake to improve the access of small and medium enterprises (SMEs) to trade-related financial services and thus increase the volume of trade and gains from it. It is recognized that proposed interventions must not jeopardize financial sector stability, the prudential integrity of financial institutions, and the support of sound, sustainable development projects.

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