Wednesday, December 09, 2009
By Kabanda Chulu
Wed 09 Dec. 2009, 04:00 CAT
BANK of Zambia governor Caleb Fundanga has challenged some commercial banks to stop dragging their feet in responding to positive economic trends by reducing lending rates.
Expressing optimism about the country's attainment of the planned economic targets for 2009, Dr Fundanga said a reduction in interest rates by commercial banks would make credit affordable among the majority of Zambian citizens.
He said government had adopted prudent fiscal policies that enabled the private sector to access more credit from the financial system.
He explained that yields on government securities have drastically reduced with the 91 days Treasury Bill rate dropping to 7.88 per cent in the latest auction while inflation has also declined to 11.5 in November 2009.
"Some players (commercial banks) have responded positively to these market movements by reducing their lending base rates. However, some are still dragging their feet and are yet to adjust their rates. While we commend the banks that have responded positively, we call upon those who have not done so to act in a positive and prompt manner in order to make credit more affordable to the majority of our people,” Dr Fundanga said.
“This in turn will lead to the growth of the productive sector and in particular, agriculture and the small medium enterprises sectors, which are the engine for economic growth of our country.”
Notable banks that have reduced their lending base rates include Ecobank and Standard Chartered to 19 per cent and 21 per cent respectively, while some commercial banks are still pegging their rates at over 24 per cent.
Dr Fundanga said the real challenge facing the financial market was how to enhance savings mobilisation and effectively channel the publicís savings to its most productive use.
"I therefore encourage banks to offer an expanded range of innovative banking products in order to mobilise savings to support financing of economic activities in all parts of the country," he said.
He urged banks and other financial institutions to explore ways of enhancing efficiency in service delivery.
"By enhancing efficiency, banks will be capable of offering more affordable banking services and this has the potential of drawing a large number of Zambians to the financial system resulting in an expanded banking clientele for the benefit of both the banks and the economy," said Dr Fundanga.
“This will go a long way in complementing the government and the Central Bank’s efforts in addressing the various weaknesses in the financial sector as well as to guide efforts for realising the vision of a stable, sound and market based financial system that will support the efficient mobilisation and allocation of resources necessary for economic diversification and sustainable growth.”