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Important issues for external loans in Mozambique

The implications of contracting loans from abroad.

The development of commercial activities is often dependent on access to credit in domestic or foreign financial markets. The attraction of foreign markets is determined by several factors, among them a more affordable rate of interest when compared to domestic rates. Or such funds can comprise loans by foreign partners to the company. However, contracting loans from abroad has implications which need to be taken into consideration, and we believe it is important to share some of them here.          

External loans are classified as a capital operations under the Foreign Exchange Law, approved by Law 11/2009 of March 11, (Article 6, paragraph 5, (f)) and as such are subject to prior approval by the Bank of Mozambique (BM). This means that before entering into a loan agreement with a foreign entity, the borrower must request prior approval from the BM. Therefore, it is necessary to consider the main aspects which the BM takes into account when it examines applications. These include the interest rate, the financial capacity of the borrower to service the loan and the loan terms.

Interest rates

In terms of interest rate, the Regulation of the Foreign Exchange Law (RLC) (approved by Decree 83/2010, of December 31), Article 72 (2) (a) establishes that the interest rate should not be greater than or equal to the interest rates practiced in the domestic market, preferably being 0%, for loans received from subsidiaries or related companies. A preferential 0% rate is also applied to shareholder loans. For third-party loans the law does not establish an interest rate. However in practice, the same criteria mentioned above apply to the market rate.

One discussion that often arises concerns the interpretation of the market rate, and whether it is considered the domestic or international market rate. The conservative response is that it should be interpreted as the domestic rate and also the rate in the market of origin of the loan funds, ie the rate prevailing in the lending market. It is important to note that, given the protectionist attitude of the BM towards national companies, ie companies incorporated and registered in Mozambique, the BM may request a reduction in the interest rate as a condition for approval of the loan agreement.

Financial capacity

In order to enable the BM to assess the financial capacity of the borrower, the RLC requires the submission of financial statements, preferably audited ones. In the case of companies that have recently been established it is possible to submit a project feasibility study in place of the financial statements. In analysing the application, the BM applies a solvency criterion of 3: 1, ie the assets of the borrower must comprise at least one third of the loan amount in order to qualify for the loan. In the absence of this solvency ratio, the loan may be rejected.

Borrower’s foreign exchange status

As is the case with funds imported as foreign direct investment, Mozambican companies with foreign partners must be duly registered. The company’s records can be verified by means of a letter issued by the BM, which assigns reference numbers to the parties involved. Proof of registration of funds is made on a Private Capital Import Bulletin (BICP) issued by the BM at the time of registration of the funds. Any irregularities in the foregoing will cause delays in the loan approval process, because any anomalies must be corrected before the loan can be approved.

Decision-making period

Although Article 64 (1) of RLC establishes a time period of 15 days for BM to decide on applications submitted for authorisation, in practice this period may be extended by 30 to 45 days, especially if the application is improperly constituted.


It is important to note that the contracting of an external loan without permission from the BM contravenes the Foreign Exchange Law and is subject to the following penalties: a) fines ranging from 10 000 MT to 100 000 MT for natural persons and from 40 000 MT to 400 000 MT for legal persons; b) fines ranging from 20 000 MT to 200 000 MT for natural persons and 1 000 MT to 1 000 000 MT for legal persons, for particularly serious offences such as simultaneously committing more than one exchange control offence; c) supplementary penalties are applied according to the severity of the offense, and include a ban on foreign exchange operations, with or without suspension of economic activity for a period not exceeding the duration of the ban.


Application for approval of external loans must be accompanied by the following documentation, in accordance with Article 83 (1) of the RLC: a) BM form duly completed; b) documents identifying the parties (commercial registration certificate for legal persons); c) draft loan agreement; d) economic or social reasons justifying the need to contract the loan; e) financial statements or proof of source of funds for repayment of the loan; f) a copy of the resolution authorising the loan in the case of shareholders’ loans.

It should be noted that the BM has the right to request additional information whenever it considers this to be necessary, which has the effect of suspending the time period in which the decision should be taken, until the requested information is submitted. In conclusion, we reiterate the importance of obtaining BM approval for contracting loans, especially since it is not possible to export funds to service an external debt without a letter approving the loan and proof of registration of the funds.

Mandlate Chade is a partner, Banking & Foreign Exchange with SAL & Caldeira Advogados LDA, Mozambique (a member of DLA Piper Africa).

Marla Chade_N


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