Monday, May 25, 2009

Govt should compel banks to cut rates – Chingambo

COMMENT - At 23%, the commercial bank's lending rates are usurious. Even the bible condemns usury.

Govt should compel banks to cut rates – Chingambo
Written by Chiwoyu Sinyangwe in Chisamba
Monday, May 25, 2009 3:13:46 PM

THERE is need to put in place policies that will compel commercial banks in the country to reduce interest rates instead of lobbying them, Professor Lloyd Chingambo has said.

Professor Chingambo, who is Lloyds Financial Services chief executive officer, charged that commercial banks were only interested in growing their wealth and not the nation’s economy.

Chingambo, who also accused the local financial institutions of not being innovative in the manner they handled risk in real sectors like agriculture, said there was need for the government to spearhead the provision of finance for development.

"Commercial banks in the country are not pro-growth. That is the fact...they are not just willing. They are not interested in growing the economy and that is why you see they are interested in supporting projects that involve trading and not real sectors like agriculture,” Prof Chingambo said.

"...in terms of reducing the cost of borrowing money, you don’t ask them [commercial banks] to reduce the interest rates because they don’t want, instead you put in policies and programmes that would put pressure on them [to reduce interest rates]."

The Central Bank and finance minister Dr Situmbeko Musokotwane have continued to condemn the high interest rates in the country, urging commercial banks to make the cost of borrowing affordable to help stimulate the economy and support growth of the real sector.

The Central Bank recently also reduced the statutory reserve ratios from 14 to eight per cent to help increase liquidity in the market and reduce the cost of borrowing.

But commercial banks have continued to resist any downward adjustments with the countryís interest rates averaging 23 per cent.

And Prof Chingambo said there was need for the government to take bigger role in facilitating finance for development.

He called for the establishment of the Venture Capital Fund (VCF) as a way of increasing financing especially to small scale farmers.

"The financial sector is just so risk averse and that is why they are not supporting the agriculture sector. There is need for banks to develop alternative ways of dealing with risk,” said Prof Chingambo. “You can’t treat the same risk today the way you did 20 years ago."

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