The Bank of Zambia (BOZ) which is Zambia’s central bank responsible for regulation of the financial sector in Zambia has given its blessing and support for the eventual developments of locally owned and controlled financial institutions.
In a statement emailed to the Zambian Business Times – ZBT, BOZ in response to public concerns on whether they would clamp down on the fast developing local initiative of community savings groups (village banking) stated that they are supportive of the initiative and stated stated that its pyramid schemes that they will not condone.
Community savings groups or village banks which is seen by many as the renaissance or start up phase for future locally owned community banks and community lending institutions which would be able to provide locally tailored financial services to meet the needs of the local communities.
Unlike most functional economies in frontier African countries such as South Africa, Kenya and Nigeria as well as developed economies where the top 10 banks in the market are locally owned, the Zambian Banking Industry is so skewed such that there is practically just about 3 out of the top 10 banks which are locally owned and controlled.
This scenario has made the banking industry unresponsive to the needs of the local Zambian economy such that most local businesses and individuals have resorted to joining community savings groups to meet their savings and financing requirements.
BOZ in what has been described as a landmark decision stated that its support to village Banking/Savings groups as they play an important role in providing community based financial services.
The central bank further stated that Zambia’s population now stands at 18 million. As the economy continues to grow, so is the need for economic diversification in the financial sector.
Village banking/Savings groups are small lending schemes organized outside the formal financial sector. As the term “village” implies membership is usually among people who are familiar with each other and share certain commonalities through their family, friends and community.
Furthermore BOZ said that village banking membership is by self-selection and the number of members in a group is limited. Members formulate rules and procedures to the guide the governance of the group. The group itself is self-managed and does not involve the placement of saving/deposits by an individual, agent or company outside the group membership.
Meanwhile, BOZ re-iterated that they regulates and supervises entities that are covered by the Banking and Financial Services Act,2017 and these do not include Village banking/savings groups. This now withstanding, BOZ recognizes the relevant role the Village banking groups play in communities, including transitioning their members into formal financial services and in driving the financial inclusion agenda’.
The Administrators of these village banks should now take this opportunity seriously to build locally owned and controlled banks that would meet local financing and savings return needs.
Most African countries, Zambia included have been held back in developing their local financial systems largely because of their over dependence on the remnants a colonial financial system which was built in the interest of a few, neglecting the needs of the majority.
The majority of the adult working population in Zambia ply their trade in what is considered as the ‘informal sector’. Zambia like most emerging countries has a disproportionately higher number of its adult citizens engaged in economic activities which remain largely unserviced with little public policy support.
BOZ has been commended for thinking outside the box and adopting more practical way of finding local solutions to local problems. For more information kindly contact ZBT via email: info@zambianbusinesstimes.com
