The Economics Association of Zambia (EAZ) has raised concerns about the exorbitant lending rates offered by financial institutions in the country which are averaging around 30 percent stating that they are severely impeding the growth of startups and adversely impacting the national GDP.
Speaking in an exclusive interview with the Zambian Business Times (ZBT) EAZ National Secretary Dr. Obby Mainza said these high lending rates are detrimental to businesses, both established and burgeoning, as they struggle to contend with the already challenging economic climate.
He stressed the importance of mitigating the exploitation of borrowers, advocating for a more supportive f inancial environment for businesses in Zambia.
Dr. Mainza also urged for the involvement of donors to counteract the domiations, but they face high interest rates of about 28 nance of commercial financial players and to provide much-needed capital and resources for business startups and existing enterprises. He said.
“The lending rates are not favorable even to an individual who goes to any lending institution whether smaller and commercial banks the interests are very high which is not conducive for any business or even the startups and even those already existing because they have a lot of bills also and they need to make positive markups, now where are they going to find a business which is going to stand and make profits and pay back such amounts amidst these challenges?”.
“It’s important to assess the business environment in Africa to determine which businesses can thrive and generate a 100 percent profit. Many businesses in Africa borrow money to invest or sustain oper– 30 percent. This makes it challenging to manage repayment. An analysis shows that only less than 50 percent or fewer businesses that borrow money are thriving as most of them end up selling their properties to repay the loans, leaving them in a negative financial position,” he said.
Dr. Mainza suggested that it is important for donors to get involved and provide capital and resources to reduce the monopoly being created by commercial financial players. He emphasized the need to decrease the exploitation of borrowers and to invite donors to provide financing for both new and existing businesses.
Dr. Mainza believes that inviting outside business funding is crucial for addressing these issues.
