MICROCAPITAL BRIEF: Bank of Zambia Urges Microlenders to Move Away From Consumption-Related Lending at Launch of Microfinance Zambia

The Bank of Zambia (BOZ), the country’s apex financial institution, has recently called for microfinance institutions operating in the country to embrace lending to productive sectors in the economy as distinct from lending for  consumer- related purposes, which is estimated to account for about 90 percent of  the amount loaned in the country’s microfinance sector.

At the launch of Microfinance Zambia, a wholly-owned subsidiary of Finance Bank Zambia Limited in Lusaka, Dr. Bwalya N’gandu, the deputy governor of BOZ, reportedly remarked that the microfinance sector constitutes the largest non-bank finance sector with assets of ZMK 1.18 billion (USD 224,000) as at June 2012. He further explained that majority of these assets are in the form of payroll-based personal loans, which are largely used for consumption purposes. For comparison, he noted that in the banking sector, consumption lending stands at 30 percent of lending.

In an effort to improve the sector, the deputy governor also noted that there were plans to increase minimum capital requirement of microfinance institutions (MFIS) and non-bank sector to improve capital position and bring down interest rates in line with economic fundamentals. MFI minimum capital requirements currently stand at ZMK 250 million (USD 47,800) for deposit-taking microfinance institutions and ZMK 25 million (USD 4,700) for non-deposit taking microfinance institutions. Microfinance Zambia Chairman Dr. Rajan Mahtani, also pledged his institution’s commitment to ensuring financial inclusion by aligning its processes, products and services in an effort to achieve economic activity and wealth creation in the country.

By Chioma Okwudiafor, Research Associate

About Bank of Zambia
The Bank of Zambia is the central bank of Zambia. The principal responsibility of the bank is to create and implement monetary policy that will maintain the economic stability of the country. The bank is active in promoting financial inclusion policy and is a member of the Thailand-based nonprofit Alliance for Financial Inclusion.

Sources and Additional Resources:

Lusaka Times Story: http://www.lusakatimes.com/2012/10/01/90-microfinance-loans-consumptionbwalya-ngandu/

MicroCapital Story: August 27, 2010, “Zambian Minister of Finance and National Planning Reaffirms Commitment to Build Financial Infrastructure for Low-Income Groups and Microfinance Institutions (MFIs)” https://www.microcapital.org/microcapital-brief-zambian-minister-of-finance-and-national-planning-reaffirms-commitment-to-build-financial-infrastructure-for-low-income-groups-and-microfinance-institutions-mfis/

MicroCapital Story: June 2, 2008, “MICROCAPITAL SPECIAL FEATURE: Survey of the Zambian Microfinance Sector” https://www.microcapital.org/zambia-microfinance-survey-current-microlending-sector-environment/

MicroCapital Universe Profile: Bank of Zambia
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Bank+of+Zambia

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