Narrative
Full Description
Project narrative
On October 16, 2015, China Development Bank (Jiangxi Province Branch) signed a $30 million loan (credit line) agreement with the Development Bank of Zambia (DBZ) for on-lending to support small and medium enterprises (SMEs) in Zambia. The loan carries the following borrowing terms: an 9-year maturity, a 0.5833-year grace period and an interest rate of 6-month LIBOR plus a 3% margin. It is backed by a sovereign guarantee and collateralized against a $6 million cash deposit (worth 20% of the total face value of the loan) in an escrow account. The loan’s (principal) amount outstanding was $20 million as of September 2017, $27,500,000 as of December 2020, $27,000,000 as of June 2021, $22,500,00 as of June 2022, and $18,000,000 as of December 2022. The loan proceeds were expected to benefit at least 50 enterprises in the agricultural manufacturing and mining sectors.
Staff comments
1. This loan was part of the CDB’s Special Loan for the Development of African SMEs Program (非洲中小企业发展专项贷款) which was established in 2009. 2. Different sources report different borrowing terms. Several media sources (e.g. source ID 116401) report a 5.5% interest rate. A 2017 World Bank report claims that the loan carried an interest rate of LIBOR pus a 3% margin and 10-year maturity. AidData relies on the DBZ 2016 Annual Report, which indicates that the loan carries an 8-year maturity and an interest rate of 6-month LIBOR plus a 3% margin (see p. 56). AidData has estimated the all-in interest rate by adding 3% to average 6-month LIBOR in October 2015 (0.528%). 3. This line of credit is not marked as umbrella since it is for a specific on-lending arrangement, so there is no risk of double-counting. 4. A Bank of Zambia (source ID 116404) publication notes that the loan is collateralized against a $6 million cash deposit (worth 20% of the total face value of the loan) in an escrow account. 5. The (principal) amounts outstanding are drawn from https://www.dropbox.com/s/cxxwuphrdzdp1h1/End%20December%202022%20-%20Public%20Debt%20Summary%20%281%29.pdf?dl=0 and https://www.dropbox.com/s/ni66tezfcgcctlc/End%20June%202021%20-%20Public%20Debt%20Summary.pdf?dl=0 and https://www.dropbox.com/s/6afvt22klw6120p/End%20June%202022%20-%20Public%20Debt%20Summary.pdf?dl=0 and https://web.archive.org/web/20210606223325/https://mof.gov.zm/?wpfb_dl=352 6. According to the World Bank's Debtor Reporting System (DRS), the weighted average grace period of all ‘private’ sector lending (worth $30 million) from all Chinese creditors to government and government-guaranteed borrowing institutions in Zambia was 0.5833 years in 2015. AidData estimates the grace period of the CDB loan that DBZ by using this figure. See https://www.dropbox.com/scl/fi/iymnqwd205mvs5h8crtv8/DRS-May-2024-Extraction-Private-Chinese-Loan-Commitments-to-Zambia.xlsx?rlkey=bi71wlqbrbnfienx75a7bq1g2&dl=0 7. According to the World Bank's Debtor Reporting System (DRS), the weighted maturity of all ‘private’ sector lending (worth $30 million) from all Chinese creditors to government and government-guaranteed borrowing institutions in Zambia was 9 years in 2015. AidData estimates the maturity of the CDB loan that DBZ by using this figure. See https://www.dropbox.com/scl/fi/7s83xx6ewetbxgoffwsi9/DRS-December-2023-Extraction-Private-Chinese-Loan-Commitments-to-Zambia.xlsx?rlkey=386ro4mctbkxdv3wsg51cp6rs&dl=0