EIB lends 20m euros to local banks for SMEs

EIB lends 20m euros to local banks for SMEs
Written by Fridah Zinyama
Thursday, November 27, 2008 11:58:35 AM

(EIB) is lending 20 million euros to five commercial banks in Zambia to support investments by small and medium scale enterprises (SMEs).

And commerce minister Felix Mutati said Zambia needs a stimulus plan to address the financial effects of the credit crunch that the international market is experiencing.

Meanwhile, Investrust Bank managing director Friday Ndhlovu has commended the European Investment Bank for providing finances to five commercial banks in Zambia as liquidity had become a major constraint in the banking sector worldwide.

The five commercial banks that would benefit from the financing agreement with EIB are Standard Chartered Bank, Stanbic Bank, Finance Bank, Investrust Bank and Africa Banking Corporation.

During the signing of the financing agreement between EIB and the five commercial banks in Lusaka yesterday, EIB Head of the Southern Africa and Indian Ocean Division, Serge Klumper, said the loan would have an important developmental impact on Zambia as it would encourage growth in the private sector.

“Accessing long term finance has been a major challenge for most of the SMEs in the country and we hope that funds that EIB is loaning to the five commercial banks will go a long way in improving the situation,” he said. “We have decided not to set the interest at which the banks will pay back the loans because experience has taught us that it makes it difficult for them to pay back the loans.”

Klupmer said the loans were being provided at very competitive interest rates and were meant for long term financing which goes up to ten years.

“Most importantly, these funds will go towards diversifying Zambia’s economy which is highly dependent on copper and will create jobs for local communities across Zambia,” said Klupmer. “This project is also supported by the Zambian government and will be used to finance investments by small companies from a wide range of sectors including industry, agriculture, tourism and infrastructure.”

And Mutati said the funds would go towards Zambia’s stimulus plan which needed to be urgently implemented because of the financial shock that the world was currently experiencing.

“As government, we would like to continue with policies that are going to ensure that a good business environment is created where business can be freely conducted,” said Mutati.

And Ndhlovu, who gave a vote of thanks on behalf of the five commercial banks, said the Zambian economy needed more funds for its continued growth.

“We are optimistic that the Zambian SMEs will greatly benefit as the funds come with favourable interest rates, longer repayment periods and the currency choice of disbursement to support export trade,” he said.

Ndhlovu said Zambia had for a long time not had access to long term financing, adding that the 20 million euros would therefore provide the much needed leverage for the growth of the SMEs.