AFRICA SME PROGRAM LOC - MOZABANCO S.A MOZAMBIQUE

• Reference: P-MZ-HAB-001
• Approval date: 11/04/2014
• Start date: 10/04/2015
• Appraisal Date: 09/04/2014
• Status: OngoingOnGo
• Implementing Agency: MOZA BANCO
• Location: MOZAMBIQUE

Background: Mozabanco is seeking long-term funding support under AfDB's Africa SME Program in order to develop and expand its SME financing activities and provide medium to long-term financing options for local SMEs in Mozambique.

The institution: Mozabanco S.A. (or Mozabank or Moza Banco) was established in 2008 and is one of Mozambique's fastest growing financial institutions. It has a strong focus on SMEs and 35% of its loan portfolio is dedicated to SMEs, with this share expected to grow over the coming years. The majority shareholder is Mozambique Capital (50.4%), a local group of Mozambican investors, followed by Banco Esprito Santo (25.1%), a Portuguese bank and Geo Capital (24.5%), a macau-based investment company. The bank has grown very fast and now has more than 32 Business Units countrywide and is ranked 6th in terms of assets. As at 31/12/2012. Mozabanco had more than MZN1.3 bln (USD45.4 mln) in shareholders' funds and MZN8.7 bln (USD294.68 mln) in total assets.

Funds Usage: Mozabanco has diverse pipeline of SME projects covering the whole country worth about MZN762 mln (USD29 mln). A significant portion of the projects require medium to long term funding which Mozabanco cannot source in Mozambique or beyond.

Commercial Viability: Mozabanco is a commercially viable institution, with a sound capital base. Its Total Capital Adequacy Ratio was in excess of 19% as at end 2012. NPLs fell from 9.4% in 2011 to 6.57% (in 2012) of the gross loan book as the bank has been improving its credit risk management. The bank has been profitable since inception, although it reported a loss of MZN56 mln (USD2.1 mln) in 2012 due to its business expansion; from a profit in 2011 of MZN24.3 mln (USD916 395, which was also significantly lower from MZN101 mln (USD3.9 mln) in 2010. The drop in profits in 2011 and the subsequent loss in 2012 were due to costs related to the branch expansion program as the bank expanded reach in Mozambique, opening more than 20 new branches in a two year period. Profits are expected to rebound in 2013/2014 as the benefits of the expansion start flowing through.

Mozabanco has diverse pipeline of SME projects covering the whole country worth about MZN762 mln (USD29 mln). A significant portion of the projects require term funding which Mozabanco cannot source in Mozambique.

BANDA Jonathan Richard Kamkosi - PIFD