A financial economist, Bright Chizonda says Zambia as a country has improved in terms of financial inclusion especially when you include the penetration of mobile money services but remains challenged when it comes to loans because the lending rates are too high.
Chizonde stated that there is need to interrogate how the interest rates are computed, come up with immediate actions that can led to the average lending rates dropping so that individuals and businesses can start to borrow for investment and growth.
Analyst say the Bank of Zambia should not just hide in technicalities, but roll their sleeves, engage banks and the treasury to come up with short, medium and long term actions to bring down the lending rates. As things stand, nothing will come out from any of the successive governments efforts if lending rates remain at rates beyond normal business or industry margins.
In an interview with the Zambian Business Times – ZBT, the financial economist called banks to come up with lending products that are suitable for the bigger number of local businesses. “They should start giving more loans that are realistic to service because some current interest rates are too high for most industry margins and local company rates of returns.
Inflation has now been recorded as a single digit, below 10%, so banks should be open about what other factors which government should work on so that we can also have single digit lending rates. Otherwise, we risk having more discussions and talk shows that will not held bring down lending rates.
When banks requirements are not realistic with what is available with the majority of the citizens, when the lending rates are too high, then micro finance institutions also have even higher rates. Informal lenders would then have even much higher rates than micro finance, so the vicious circle continues.
He further added that it is gratifying to note that the banking sector has made itself familiar with mobile money and thus they have allowed transactions from and to their respect bank accounts. Chizonda stated that Banks should continue going that direction of encouraging closer collaboration between mobile accounts and Banks as it increases subscribers and continues to encourage financial inclusions. The next step now would b extending lending services to the larger mobile money account holders.
