Firm to raise US$10m for SMEs

Nelson Gahadza

SMARTVEST WEALTH MANAGERS expect to raise up to US$10 million through the issuance of the first tranche of one million units for the Smartvest High-Income Fund (SHIF) at US$1 each, with the funds targeted mainly to support small and medium enterprises (SMEs).

SMEs are considered a key pillar of Zimbabwe’s economy, generating around 60 percent of the Gross Domestic Product (GDP), and more than 50 percent of employment, according to the National Competitiveness Commission.

However, while SMEs are vital drivers of job creation and economic growth, they often lack access to sources of traditional funding due to limited credit history or high perceived risk.

Smartvest Wealth Managers chief executive officer Mr Peter Kadzere said the fund sought to deliver a high level of income and moderate capital growth for investors by investing in short-term secured money market instruments, backed by quality loan portfolios for SMEs, administered by regulated and licensed financial institutions.

“This fund aims to bridge this gap by providing financial institutions with tools to unlock liquidity trapped in existing loan portfolios, allowing them to extend more credit to SMEs.

“The fund offers alternative financing options for medium-sized enterprises through the securitisation of contractual receivables,” he said in a presentation during a Zoom meeting on Thursday.

Mr Kadzere said the fund also improved access to capital and empowered SMEs to grow their businesses and contribute more significantly to the economy.

The SHIF is a collaboration involving Financial Securities (FINSEC), Lincoln Capital and Smartvest Wealth Managers, and the fund is denominated in USD, offering fixed-income security to investors.

At inception, each unit is denominated at US$1, backed by the securitisation of secured asset-backed loan portfolios, and each unit has a minimum maturity of 12 months. The minimum investable amount is US$100, with an interest rate of 20 percent per annum, and the units are tradeable on FINSEC.

According to Mr Kadzere, while the overall economy faces challenges, SMEs are a vital source of employment and GDP.

He said the SHIF was created specifically to address the critical need for improved financial services for this sector.

In terms of the salient features of the SHIF, the units will be backed by secured notes. Additionally, the secured notes are high-quality loan-based securities created through securitisation of loan portfolios.

The loans are secured by immovable property with registered mortgage bonds.

“Mortgage bonds on immovable property cover 150 percent of the principal amount in favour of debt promoters,” he advised.

The units have credit insurance cover of up to 75 percent by the Export Credit Guarantee Corporation of Zimbabwe to cover underlying loan default risk and to maintain fund liquidity.

Mr Kadzere said the issuer would apply for prescribed asset (PA) status.

“The units will be listed on the FINSEC Mutual Fund Board to facilitate open market trading and price discovery, allowing investments and disinvestments,” he said.

Lincoln Capital managing director Mr Elimon Taundi said the fund benefits from the expertise of debt promoters, which identify and securitise loan portfolios.

It also has a trustee to safeguard assets, while an auditor will ensure financial accuracy.

“A sponsoring broker and market maker will facilitate investment and disposal transactions,” he said.

Capital markets regulator Securities and Exchange Commission of Zimbabwe (SecZim) has since approved the listing of the SHIF as a quoted security on the Financial Securities Exchange (FINSEC) Mutual Funds Board.

SecZim chief executive officer Mr Anymore Taruvinga said the listing of the SHIF demonstrates the continued growth of Zimbabwe’s capital markets.

“We have recently approved the fund’s listing on the FINSEC main board, and they are working on the modalities to complete the process of listing,” he said.

Mr Taruvinga said the fund would address challenges of capital raising and enhance the participation of SMEs and individuals in capital markets.

In his presentation, FINSEC business development manager Mr Victor Mukara said FINSEC is a licensed securities exchange that operates as an alternative trading platform, fully licensed and regulated by SecZim.

He said the fund sought to provide current income while maintaining liquidity by investing in alternative debt for SMEs.

“The Smartvest High-Income Fund is registered as a collective investment scheme (CIS) to deliver a high level of income and moderate capital growth over time for investors through investing in short-term secured money market instruments, and the fund seeks to provide current income while maintaining liquidity by investing in alternative debt for SMEs,” he said.

FINSEC was established as the country’s first alternative trading platform (ATP), other than the Zimbabwe Stock Exchange, and operates two major market segments, namely public markets and private markets.

Public markets refers to a public market board for listing and trading of public company debt and equity instruments on the ATP.

The market also allows the listing and trading of mutual funds that are listed on the exchange; these include commodity funds.

Private markets are a marketplace that brings together private companies, banks, issuers, investors and various stakeholders seeking alternative investment opportunities.

The platform allows liquidity providers to either buy debt or equity instruments. Instruments such as promissory notes and commercial papers can be traded.

Zimbabwe’s capital markets continue to evolve. Through the digitalisation of trading, the markets keep transforming and building capacity to offer a wide variety of new products.