FDH Bank rolls out bid bonds

Post was last updated: April 5, 2018

One of the country’s commercial banks, FDH Bank, on Tuesday rolled out a three-month bid bond campaign aimed at helping businesses effectively compete in tender processes.

A bid bond is a form of security that is provided by a financial institution to a contract buyer as a guarantee of their financial capacity to fulfil the obligations of the contract.

Speaking during the launch, FDH Bank Managing Director, Eric Ouattara, said the launch of the bid bonds will go a long way in opening up financial access opportunities to bidders as well as overall financial sector deepening in Malawi.

Ouattara said the bid bond has been developed following feedback from customers, who were facing difficulties in collateral requirements as well as the long procedure and processes before a bank issues the bid security.

“We are rolling out a product that will require no collateral for up to K100 million with a 24-hour turnaround time,” Ouattara said.

He said FDH Bank is committed to promoting trade and supporting local businesses to grow with the bank.

“As your trade finance partner in Malawi, FDH Bank also provides letters of credit facility as well as other banks’ bank guarantees such as Performance Bonds and Advance Payment Guarantees,” Ouattara said.

The launch of the campaign comes barely a week after one of the country’s engineering experts indicated that failure to produce a bid bond is one of the stumbling blocks affecting small and medium enterprises (SMEs) from effectively competing with big firms in tenders.

Mdina Engineering Managing Director, Tione Mdina, said most countries have waived the bid bond to allow small companies to compete with big ones.

“Here in Malawi, the bid bond is a big issue. A lot of contractors are failing to grow as they are limited in their works.

“The bid bond at most favours big companies to bid for major contracts. This puts local contractors out of the way. That is why you find that major contracts are awarded to foreign companies and not Malawian companies,” he said.

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