The Government plans to cut financing expenses for Micro, Small and Medium Enterprises (MSMEs) by 5% through a revision of the Single Benchmark Agreement, eliminating the cost premium, according to documents reviewed by Lusa. The measure is part of the Economic Recovery and Growth Plan (Prece), which aims to create more favorable conditions for access to credit.
“In the context of economic recovery, it is necessary to create conditions that make access to financing more affordable,” states the Prece, emphasizing that the main goal is “to reduce the cost of financing.” The decision comes as the Government seeks to stimulate productive investment and boost the economy.
According to the document, revising the Single Benchmark Agreement will allow the prime rate to be adjusted from 17.20% to 12.20%, making credit more accessible. “The objective is to remove the cost premium, which will reduce financing expenses by 5%,” notes the Prece, which also foresees “special and tailored financing lines” for sectors such as agriculture, industry, and housing.
The Government acknowledges that MSMEs have faced difficulties accessing credit, mainly due to high interest rates and the lack of collateral. “The inclusion of both the cost premium and the banking spread represents a duplication that burdens MSMEs’ financing costs. Therefore, it is proposed to remove the cost premium when calculating the interest rate,” adds the Prece.
The cost premium is the margin that reflects banking activity risks not included in interbank market operations. This amount is added to the single benchmark rate to form the prime rate of Mozambique’s financial system, which is calculated quarterly by the Mozambican Banking Association (AMB).
Indexante Único and Prime Rate
The AMB’s methodology for calculating the cost premium considers the country’s credit rating, the ratio of non-performing loans, the ratio of restructured credit, and the reserve requirement coefficient for liabilities in local currency. These elements determine the final cost of credit in the country.
“To calculate the final interest rate charged to borrowers, another element — the banking spread — is added. This spread accounts for client risk, inflation, and other factors,” the document details. The combination of these factors defines the effective rate companies pay on loans.
Currently, the reference interest rate for credit in Mozambique remains at 16.5%, according to the AMB, which chose not to follow the recent cut implemented by the Bank of Mozambique. Since January 2024, the prime rate has been steadily declining after remaining at a peak of 24.1% for six months.
Fluctuations in the prime rate are linked to the monetary policy rate (known as the MIMO rate), set by the Bank of Mozambique to control inflation. In August, the prime rate fell to 17.20%, and in September to 16.5%, remaining stable in October by decision of the AMB.
Recently, the Monetary Policy Committee (CPMO) of the Bank of Mozambique cut the MIMO rate again by 0.50 percentage points, setting it at 9.75%. This marks the tenth consecutive cut since the beginning of the year, as announced by Governor Rogério Zandamela.
Monetary Policy and Economic Stability
According to the Governor, “this measure reflects the continued expectation that inflation will remain in single digits in the medium term, partly due to exchange rate stability and favorable international commodity prices.” However, he warned of “persisting domestic risks and uncertainties.”
The key interest rate had been fixed at 17.25% since September 2022, following the central bank’s intervention to contain inflation. Starting in January 2024, the Bank of Mozambique began a cycle of consecutive cuts, reducing the rate to 16.5% by the end of that month.
Zandamela emphasized that this “normalization process” began in early 2024, with an estimated duration of “24 to 36 months.” The goal is to make credit more accessible for businesses and households, encouraging investment and domestic consumption.
The Governor highlighted that the 700 basis-point cumulative reduction represents “a significant gain for the system,” benefiting the national economy. “It was a major gain for the system,” he reiterated, noting the positive effects of the gradual rate-cutting policy.
However, he acknowledged that the decline in banks’ lending rates to clients has “not fully matched” the central bank’s cuts. “Banks’ reference rates for clients have also dropped significantly — about 600 basis points over the same period — but not entirely in line with the base rate reduction,” he noted.
Support for MSME Financing
By removing the cost premium, the Government aims to create a more favorable credit environment and ease the financial burden on businesses. The measure is expected to stimulate productive sectors and promote sustainable economic growth.
By simplifying the interest rate structure and eliminating duplications, the Government seeks to ensure that the cost of credit more accurately reflects real risk. The initiative also reinforces the State’s commitment to supporting MSMEs, considered the backbone of Mozambique’s economy.
Lower interest rates and targeted credit lines for agriculture, industry, and housing are expected to boost private investment and employment. This will help accelerate economic recovery and strengthen the country’s competitiveness.
The Prece, which includes this measure, is part of a set of policies designed to foster growth and resilience in Mozambique’s economy. The revision of the Single Benchmark Agreement is therefore a key step toward easing the financial burden that has hindered MSME development.
With this new approach, the Government is promoting greater financial inclusion, a more dynamic economy, and an improved business environment, reducing long-standing barriers to credit access in Mozambique.
Source: Diário Económico
