What Prime Minister Kassim Majaliwa told contractors in Mtwara

Mtwara. Prime Minister Kassim Majaliwa urged contractors, who implement public projects, to cultivate a culture of seeking financing from commercial banks instead of depending entirely on advance payments from the government.

Mr Majaliwa said this here yesterday when he graced a meeting of contractors who double as CRDB clients in Mtwara, Lindi and Ruvuma regions.

He said the government was aware that most contractors were facing a challenge of capital to implement their projects smoothly, noting however that the availability of financing options from commercial banks was a positive development.

“Today, CRDB Bank has introduced an opportunity which you must utilise effectively…I am sure this meeting will be a wake up call for contractors at local government level who fail to complete their assignments on time due to a challenge of capital,” he said.

CRDB Bank chief executive officer Abdulmajid Nsekela said the conference was meant to show the contractors financing options that the bank has for them.

“We have a number of products that are specifically for you such as: purchase order financing, contract financing and invoice discounting which do not need any form of collateral,” he said. Purchase order financing is a short-term commercial finance option that provides capital to pay suppliers upfront for verified purchase orders while a contract financing is a way for a business to receive a cash advance on work it was yet to perform.

And invoice discounting is a financing facility that allows business owners to leverage the value of their sales ledger.

He said the bank also issues advance payment guarantee, performance guarantee, letters of credit and insurance services among others. Banks issue bid bonds as part of a supply bidding process by the contractor to the project owner, to provide guarantee, that the winning bidder will undertake the contract under the terms at which they bid.

Similarly, a performance bond is issued by banks or insurance firms to guarantee satisfactory completion of a project by a contractor.

Banks also issue advance payment guarantees when the contract provides for advance payment to be made to the seller or the project owner as assurance that the money (advance payment) will be returned to the buyer if the seller does not fulfill his obligations on delivery of goods or services.

A letter of credit is a payment mechanism used in international trade to provide an economic guarantee from a creditworthy bank to an exporter of goods.