The Bank of Zambia – BoZ has disclosed that it has not imposed restrictions on who commercial banks and financial institutions can lend the K10 billion medium-term facility to and has clarified the position following reports indicating that the facility is only intended for customers with existing loans with their respective banks.
In the wake of the COVID- 19 pandemic, BoZ introduced a K10 billion Medium-Term Refinancing Facility to enable Financial Service Providers (FSPs) support businesses and households that are being negatively impacted by COVID-19 through credit facilities with an interest and repayment moratorium.
Concerns as to who is eligible to apply for the facility and access the funds have arisen with some individuals and local businesses being turned away and confirming that they are unable to access the funds as most commercial banks have restricted the facility to existing lending customers only.
But BoZ governor Dr. Denny Kalyalya told the Zambian Business Times – ZBT on May 20,2020 that the K10 billion facility is not only for existing bank credit customers but both existing and new customers saying commercial banks where not restricted as to whom they can lend to.
He said the bank only indicated that the facility is intended to be disbursed to individuals and businesses through their respective FSPs, however priority is to support sectors and businesses that will propel economic recovery and stimulate private sector led growth.
“This facility is available for all and we did not put constraints on commercial banks regarding who they can lend the funds to, we only said the facility will prioritise sectors identified in the 7th National Development Plans – 7NDP such as the agriculture, manufacturing, energy and tourism which will receive 60% of the funds while the rest of the sectors shall access the remaining 40%.,” He added.
At the same event BoZ Deputy Governor Operations Dr. Francis Chipimo said FSPs will access this facility from BOZ at an interest rate of 12.5%. He said that this interest rate is part of the normal banking system services that happen between the central bank and commercial banks in the lending market.
He added that individuals and businesses can also use government securities as collateral to borrow from the Banks, however each bank will have to vet this collateral and that it should pass the internal test set for one to be able to get a loan.
He added that this facility was created to strengthen and enhance financial sector resilience particularly in the wake of the outbreak of the Coronavirus and its potentially devastating impact on the domestic economy.
