HARARE - Britain has extended a $100 million loan to Zimbabwe's private sector, the first direct commercial loan to the southern African country in over two decades, the state-controlled Herald newspaper reported Thursday.

The newspaper quoted Reserve Bank of Zimbabwe Governor John Mangudya as saying that the facility, in which Britain partnered the Standard Chartered Bank, would go a long way in improving the companies' competitiveness.

UK's development finance institution, CDC, will share the default risk on loans to provide foreign exchange to Zimbabwean companies.

The loan will be for up to three years and can be used for capital expenditure or working capital. It is believed that companies in food processing, manufacturing, and agricultural sectors are likely to benefit.

"This is a significant move in that it is a medium-term facility to be used for the revival of companies in Zimbabwe," Mangudya said.

He said there had been a deficit of medium-term funding to Zimbabwean private companies due to Western sanctions, adding that the loan would help the companies to retool and boost productivity.

The governor said the loan facility was a sign of confidence by the international community in Zimbabwe following the advent of a new administration led by President Emmerson Mnangagwa.

"It is a seal of approval or endorsement of government polices and measures aimed at transforming the economy into a middle income by 2030. From the RBZ side, we are pleased by this facility because it will increase exports by Zimbabwean companies," he said.

CDC chief executive Nick O'Donohoe said they started preparing the loan facility as soon as former President Robert Mugabe left office.

Mugabe resigned in November last year after a military intervention, ending his uninterrupted 37 years in power.

"We think it's pretty significant. Zimbabwe's economy has been shattered over the last two decades, yet holds real potential," O'Donohoe said.

He said the last direct CDC loan to Zimbabwe was to a fish farm in 1994.

Sunil Kaushal, regional chief executive of Standard Chartered Bank, said the loan facility was similar to that of a previous partnership with CDC when the two lent to Sierra Leone at the height of the Ebola epidemic in 2015.