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Guarantees

An instrument issued to a buyer/contractor by an acceptable third party (a bank ) guaranteeing that the buyer/contactor will comply to its obligations under the contract. If he/she fails to do so, the bank  will be  liable  for the said amount.

Types of Guarantees

  • Bid/Tender Guarantee (bond)
  • Performance Guarantee (bond)
  • Advance Payment Guarantee
  • Payment Guarantee
  • Retention Guarantee

Bid/Tender Guarantee

A guarantee issued to contractors for tendering the work. The

percentage required ranges from  2.5 - 5% of the contract sum.Limit of up to TZS 200 million per customer

Benefits

Enables the customer tender for more bids

Performance Guarantee

A guarantee issued to contractors to enable them execute

contracts awarded to them. The percentage required ranges from 5 – 10% of the contract sum.

It must be fully secured by either mortgage and/or cash cover.

Benefits

Validates the contract awarded to the contractor.

Advance Payment Guarantee

A guarantee issued as advanced funds to contractors to enable them begin the work contracted to them. The percentage required ranges from 15 – 30% of the contract sum. It must be fully secured by either mortgage and/or cash cover.

Benefits

Enables the customer make necessary preparations for initial star- up of project.

Payment Guarantee

A guarantee issued to suppliers as an assurance of payment after sale of goods. It must be fully secured by either mortgage and/or cash cover.

Benefits

  • Boosts the customer’s turnover
  • Relief of working capital

Retention Guarantee

A guarantee issued to the contractor’s employer as an

  • assurance after completion of project.
  • It must be fully secured by either mortgage and/or cash cover.

Benefits

  • Avails the contractor with the required 10% retention so as to move on to other projects.
  • Avails the contractor with working capital earlier than expected.