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Banks’ high interest rates have stifled business growth - ZFE

Banks’ high interest rates have stifled business growth - ZFE
By Namatama Mundia
Sun 04 July 2010, 04:00 CAT

THE Zambia Federation of Employers (ZFE) has told commercial banks that the high interest rates being charged have stifled business growth in the country.

Speaking when ZFE board of directors and senior management staff paid a courtesy on the Bankers Association of Zambia (BAZ) at Citibank, ZFE president Dr George Chabwera said most businesses were unable to acquire debt finance for expansion of businesses which was vital for meaningful employment creation.

Dr Chabwera noted that commercial banks where employers and therefore members of the ZFE whose operations were equally affected by the high cost of doing business in the country like any other businesses.

He called on BAZ to engage with the ZFE and lobby for a reduction in the cost of doing business and an improved business legislation.

Dr Chabwera added that ZFE was concerned with the high interest rates in the country despite a single digit inflation rate and a good economic outlook.

And BAZ chairperson Savior Chibiya, who is also Citibank managing director, acknowledged the fact that interest rates in the country were higher than expected due to several factors other than inflation rate.

“Current default rate on loan repayment stands at 15 per cent when normal default rate is expected to be 6 per cent. The high default rate is a risk factor which builds into high interest rates as banks would like to recover the lost income on non-performing loans,” Chibiya said.

“Other than inflation and default rate, high labour costs of skilled manpower, high legal costs in resolving industrial disputes, high security costs in cash transfers and high telecom expenses all build up into interest rates.”

And responding to a question on why most commercial banks were unable to provide long-term borrowing beyond five years, Chibiya said this would only be possible if depositors develop a culture of keeping their deposits in the bank beyond a period of five years.

He called on the legal fraternity to revisit their fee structure in order to make a contribution towards reducing the cost of doing business in the country.

Chibiya further called on the state to seriously look into the possibility of reducing the cost of telecommunication and also to improve the education system in order for the country to produce enough skilled manpower.

Labels: GEORGE CHABWERA, LENDING RATES, SAVIOR CHIBIYA, ZFE

posted by MrK @ 1:52 PM