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Dr Musokotwane urges banks to be proactive

Dr Musokotwane urges banks to be proactive
Written by Kabanda Chulu
Saturday, April 11, 2009 5:42:13 AM

FINANCE minister Situmbeko Musokotwane has expressed concern that commercial banks are constantly adjusting base rates in relation to inflation fluctuations while interest on savings has remained constant. And Dr Musokotwane has challenged commercial banks to devise innovative products in order to take advantage of opportunities in the market.

Commenting on the high lending rates that have characterised the Zambian financial markets, Dr Musokotwane said statistics from the Bank of Zambia showed that although the weighted average lending base rate had dropped from 26 per cent in 2006 to around 21 per cent at the end of 2008, there had been an increase in the current levels.

“The average savings rates remained constant at 4.8 per cent and deposits of over K20 million held for six months attracted only 6.6 per cent in 2008. Whereas the base rate is adjusted in concert with inflation fluctuations, the compensation for savings has remained constant,” Dr Musokotwane said.

“This is of great concern to government as financial institutions such as commercial banks have an important role of mobilising savings to channel these to productive sectors such as agriculture.”

He said high lending rates made productive borrowing difficult.

“I am aware that, for instance, some commercial farmers resort to borrowing US dollar loans which are more competitive. However, this results in quoting prices for their produce in US dollars when the local currency weakens against the US dollar so that they can repay these loans,” Dr Musokotwane said. “My appeal is for banks to be more proactive and introduce products which counter such effects such as hedging products. The financial sector needs to pull up its socks and devise more innovative products which take advantage of the opportunities in the market.”

Dr Musokotwane however observed that some banks had started to look at small-scale and emergent farmers for their seasonal financing needs.

“This needs to be extended further to include finance for mechanisation, storage and transportation. The stimulus we have provided to agriculture in the budget is not expected to have an impact in this year’s marketing season as when the budget was announced, the seed had already germinated,” said Dr Musokotwane.

“But it is expected that all stakeholders will take advantage of government’s well-intended efforts and align their product offerings to embrace these opportunities for increased production in the 2008/2009 planting and harvest season.”

Labels: BANKING, INTEREST RATES, SITUMBEKO MUSOKOTWANE

posted by MrK @ 4:43 AM