MICROCAPITAL SPECIAL FEATURE: Survey of the Zambian Microfinance Sector

The microfinance sector in Zambia is currently facing the after effects of default in government funded and privately run microfinance programs. The market suffers from high levels of poverty, a huge HIV/AIDS epidemic, and the planned regulation of microfinance activities by the central bank. The microfinance sector in Zambia is still in its developmental stage.

Zambia is one of the poorest countries in the world with 64 percent of the population living on less than one dollar a day, and an unemployment rate of 50 percent. Eighty-five percent of workers work in agriculture. Those that work in industry are mostly involved in copper mining. Currently, 70 percent of the population depends on the informal sector for their livelihood. Over one third of the adult population is self employed.

An extensive survey on the Zambian financial sector conducted by Fin Scope and released in 2007 concluded that two thirds of the country’s adult population had no access to financial services.

The range of financial products offered in the region is very narrow and focuses mostly on credit services.

In a 2005 publication by the United Nations Capital Development Fund (UNCDF), Webby Mate, the Executive Secretary to the Association of Microfinance Institutions of Zambia (AMIZ) expressed the need for microfinance institutions to mobilize public voluntary deposits in order to facilitate sustainability an improved outreach. Currently, as reported by FINCA Zambia, MFIs are required by government regulation to register as either deposit-taking or credit-only institutions and credit-only institutions are not allowed to mobilize client savings. However, the Bank of Zambia turns a blind eye to forced savings by credit institutions for low-income clients.

According to a case study published in 2006 by Chiara Chiumya of the University of Manchester, the majority of microfinance institutions in Zambia are donation dependant projects, many of which are run by church groups and are not self-sustaining. Micro-credit is largely seen as a type of welfare largely due to the fact that many projects in the country give out soft loans charging very little or no interest.

The Zambian financial sector suffers from poor outreach caused by lack of basic infrastructure in rural areas. Bank branches and financial institutions are concentrated along the Zambian railway lines, and for the most part in urban and peri urban areas. Rural areas have unreliable electricity supplies and the country’s telecommunications system is poorly developed, causing a significant communication obstacle. Thus operation costs in rural areas are a deterring factor to rural development. Nearly half of Zambia’s 73 districts do not have any access to financial institutions.

By Melissa Duscha

Additional Resources:

Association of Microfinance Institutions of Zambia (AMIZ) MIX Market Profile

FinMark Trust

FinMark Trust, FinScope: Access to financial products in Zambia: an analysis based on FinScope data, February 2007

http://www.finmark.org.za/Documents/Zambia_B_I_MFI.pdf

Department for International Development (DFID)

The Regulation of Microfinance Institutions: A Zambian Case Study, Chiara Chiumya, 2006

http://microfinancegateway.org/files/46210_file_Complete_Thesis.pdf

Survey of MFIs in Zambia:

The Association of Microfinance Institutions of Zambia (AMIZ) is the apex network of the Zambian microfinance sector, established in 1998 as an umbrella project of the World Bank Action Research Champion Team. AMIZ currently reports to MIX market.

Contact Information:

Address: 609 Longolongo Road, 6th floor Godfrey House

Lusaka, 10101

Zambia

Phone: 260-1-236258

260-97-159174

Fax: 260-1-236258

Email: amiz@zamtel.zm

PRIDE Zambia

PRIDE Zambia is a non-profit (NGO) established in 2000 with a mission to be the premier financial services provider to small micro medium enterprises (SMME) markets in Zambia. There are currently 10 branch networks in six towns across the country. Their products include loans, fund transfer services and training and consulting. PRIDE’s largest funder is SIDA. At the end of 2006, they had 3,687 active borrowers according to their MIX market profile. Their gross loan portfolio was reported at USD 1.5 million with total assets of 1.46 million and a return on assets of -5.15 percent. Their return on equity was reported at -107.68 percent as of 2006.

Address: Plot 742, Cha Cha Cha Road, South End

P.O.Box 36263

Lusaka

Zambia

Phone: +260 1 231257/231349/50

Fax: +260 1 231251

Email: pride@coppernet.com

Website address: http://www.pridezambia.org/

CETZAM Opportunity is a non-bank financial institution established in 1998 with the mission of providing financial services and training resources to the poor through a financially viable nationwide micro-finance institution. With the aid of DFID, CETZAM became the first sustainable and regulated microfinance institution in Zambia on a national scale. CETZAM offers credit in the form of trust bank loans (group loans), solidarity group loans (smaller groups), and individual loans. CETZAM also offers insurance and training and consulting. They are affiliated with Opportunity International and the Association of Microfinance Institutions of Zambia (AMIZ). As of 2008, their number of active borrowers decreased by half to 2,410 clients. MIX Market reports their gross loan portfolio at USD 1.6 million with total assets of USD 2.25 million at the end of 2007. Their return on assets (ROA) was reported at -6.72 percent with a return on equity (ROE) of -10.76 percent.

Address: 4th Floor Mukuba Pension House,

Dedan Kimathi Road,

Private Bag E 760

Lusaka

Zambia

Phone: 00-260-1-222980

00-260-1-222991

Fax: 00-260-1-222961

Email: info@cetzam.com.zm

bmulenga@cetzam.com.za

FINCA Zambia was established in 2001 and is currently registered as a non-bank financial institution with a mission to provide financial services in the form of micro credit and savings to Zambia’s productive low-income population. FINCA Zambia currently has nearly 12,000 active borrowers of which 78 percent are women. Their current gross loan portfolio as reported by MIX Market is at USD 1.9 million with total assets of USD 3 million. Their return on assets (ROA) was reported at -17.34 percent with a return on equity (ROE) of -42.46 percent. FINCA Zambia is affiliated with AMIZ and FINCA International. They are rated by ACCION’s CAMEL rating system however, their current rating was unavailable.

Address: Plot 1215/3 Mukonteka Close

Off Great East Road

Rhodes Park

Lusaka

Zambia

Phone: +260-1-251736

Fax: +260-1-251736

Email: finca@finca.co.zm

MicroBankers Trust (MBT) is a non-bank financial institution established in 1996 with a mission to provide financial services in the form of savings, loans and training and consulting to vulnerable women and men for enterprise development. The MIX Market reported 7 thousand active borrowers at the end of 2006 with a gross loan portfolio of USD 873,000 and total assets of USD 2 million. Their return on assets (ROA) was reported at -16.91 percent with a return on equity (ROE) of -18.57 percent.

Address: No 57 Zambezi Road

Roma

Postal code 51122

Lusaka

Zambia

Phone: +260-1-291-393

Fax: +260-1-290-852

Email: mbt@microlink.zm

Pulse Financial Services Limited is a non-bank financial institution established in 2001 providing loan and insurance services. PULSE was initially funded by CARE UK in 1995 and expanded with the assistance of DFID, registered as Pulse Holdings Limited in 2001. As reported by MIX Market, PULSE had 2,851 active borrowers at the end of 2006 with a gross loan portfolio of USD 600,000 and total assets of nearly USD 700,000. Their return on assets (ROA) was reported at 7.64 percent with a return on equity (ROE) of 8.86 percent. PULSE is also affiliated with AMIZ.

Address: Plot No. 9696 East Road, Off Munali Road

Chudleigh

P.O Box RW 51269

Lusaka

Zambia

Phone: +260-1-295-642

+260-1-295-667

Fax: +260-1-295-642

Email: info@pulse.com.zm

Other Listed MFIs in Zambia (Note: These MFIs do not currently report to MIX):

African Development Foundation
Sithabile Ndiweni, Harare
phone: 795525 or 700249

http://www.whitehouse.gov/omb/expectmore/summary/10004614.2005.html

CUSA-Zambia
Credit Union & Savings Association of Zambia
M.M. Milupi
phone: 260-1-22-8745 or 6 fax: 260-1-22-3837

Desai Revolving Fund Project
(Young Women’s Christian Council of Zambia)

Lima Bank LTD
V. Kasapato
phone: 228073 or 5 fax: 228077

National Savings & Credit Bank of Zambia
Mr. G.J. Chembe, director
phone: 2601-228-985 fax: 260-1-223-296

Village Industry Service
Joyce Mapoma
phone: 260-1-228653 or 4 fax: 260-1-225303

WFTZ
Women’s Finance Trust of Zambia Limited
Ms. M.M. Yeta
phone: 260-1-227-335 fax: 260-1-227-184

ZCF Finance Services Ltd
Charles Chitembo phone: 221628 or 261579 fax: 227335 or 261631

Zusa Senanga
Inonge Lewanika
phone: 260-1-225789 fax: 260-1-225789

Zambia Microfinance Sector Recent Publications:

All Africa: Zambia: The Call to Support Small and Medium Enterprises

http://allafrica.com/stories/200805280422.html

Association of Microfinance Institutions of Zambia (AMIZ) MIX Market Profile

Banking Sector Reform and Financial Regulation: It’s Effects on Access to Financial Services by Low Income Households in Zambia, Chiara Chiumya, September 2004

http://www.competition-regulation.org.uk/conferences/southafrica04/chiumya.pdf

CEZAM: Microfinance and Gender Equality: Are We Getting There?

http://www.sarpn.org/documents/d0002613/Gender_microfinance_Mutalima.pdf

CGAP Working Group on Microinsurance, Good and Bad Practices, Case Study No. 10, Madison Insurance: Zambia

http://www.microfinancegateway.org/files/27602_file_cstudy10.pdf

Development Economics and Public Policy: Working Paper Series: Paper No. 13, Banking Sector Reform and Financial Regulation: It’s Effects on Access to Financial Services by Low Income Households in Zambia, Chiara Chiumya, University of Manchester, November 2004

http://ageconsearch.umn.edu/bitstream/30552/1/de050013.pdf

FinMark Trust: Access to Housing Finance in Africa: Exploring the Issues: Zambia, David Gardener, Kecia Rust, May 2007

http://www.finmark.org.za/documents/2007/MAY/HFAfrica_Zambia.pdf

FinMark Trust, FinScope: Access to financial products in Zambia: an analysis based on FinScope data, February 2007

http://www.finmark.org.za/Documents/Zambia_B_I_MFI.pdf

Implementation Structure of the Financial Sector Development Plan (FSDP), Government of Zambia

http://www.boz.zm/FSDP/FSDP_ImplementationStructure.pdf

International Monetary Fund (IMF) Country Report: Zambia: Poverty Reduction Strategy Paper

http://siteresources.worldbank.org/INTZAMBIA/Resources/zm_prsp_06.pdf

International Monetary Fund (IMF): Zambia and the IMF

Loan Officers and Loan ‘Delinquency’ in Microfinance: A Zambian Case, Rob Dixon, John Ritchie and Juliana Siwale, April 2006 (available for purchase here)

MICROCAPITAL STORY: Bank of Zambia Warns of Action Against Unlicensed Microfinance Institutions

http://microcapitalmonitor.com/cblog/index.php?/archives/354-Bank-of-Zambia-Warns-of-Action-Against-Unlicensed-Microfinance-Institutions.html#extended

Microinsurance and HIV/AIDS in Zambia: A Case Study of Madison Insurance Company Zambia Ltd.

http://www.un.org/esa/sustdev/sdissues/finance/egm2007/presentations/agnes.pdf

MIX: Overview of the Outreach and Financial Performance of Microfinance Institutions in Africa

http://www.mixmbb.org/Publications/002-REG/AFRICA/02-AFRICA%20OTHER%20REPORTS/MIX_2003_African_Microfinance_Study_EN.pdf

PAPER WRAP-UP: Loan officers and loan “delinquency” in Microfinance: A Zambian case, by Rob Dixon, John Ritchie, and Juliana Siwale.

The Regulation of Microfinance Institutions: A Zambian Case Study, Chiara Chiumya, 2006

http://microfinancegateway.org/files/46210_file_Complete_Thesis.pdf

The Regulation of Microfinance in Zambia, Chiara Chiumya

March, 2006

The Role of Microfinance in Addressing the HIV/AIDS Pandemic in Zambia: The Rainbow Model Provides a Future for AIDS Orphans, Francesco Strobbe, European Central Bank

http://www.uncdf.org/english/microfinance/pubs/newsletter/pages/2005_04/news_pandemic.php

The World Bank: Zambia Resources

http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/AFRICAEXT/ZAMBIAEXTN/0,,menuPK:375673~pagePK:141159~piPK:141110~theSitePK:375589,00.html

The World Bank Policy Research Working Paper 4061: Access to Financial Services in Zambia, Jose de Luna Martinez, November 2006

http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2006/11/08/000016406_20061108094235/Rendered/PDF/wps4061.pdf

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