Maravi

Musokotwane bemoans disparity in interest on loans, savings

Musokotwane bemoans disparity in interest on loans, savings
By Mutale Kapekele
Wed 03 Nov. 2010, 04:00 CAT

FINANCE minister Dr Situmbeko Musokotwane has challenged the financial sector to reduce the interest spread and award holders of savings accounts reasonably. Dr Musokotwane observed that the wide difference between interest on loans and interest on savings accounts discouraged people from saving.

Currently, banks charge interest of 19 to 23 per cent on loans, and in some cases almost 30 per cent, while awarding their clients as little as 0.2 to three percent interest on savings.

Dr Musokotwane observed that without savings, banks could not have funds to loan out and challenged them to increase interest rates on savings.

“Currently, the interest spread is so wide that interest paid on savings does not encourage placing of money in our banks. Coupled with many tariffs, fees and charges that bank clients face, the return in real terms can even be negative,” said Dr Musokotwane during the commemoration of the World Savings Day that was organised by NatSave on Saturday.

“Under the current circumstances, it will be difficult but not impossible to persuade the Zambian public to improve on their saving culture. I therefore challenge banks to pass on part of their return on loans to the owners of the money by relatively improving the interest rates being paid on savings. There should be a realistic reduction of margins between interest collected and that which is paid. In addition, we must scale up the provision of affordable mortgages to enable our people to build homes.”

He said the provision of affordable, quality and decent housing was necessary for improving living conditions and reducing the disease burden.

“Although there has been some improvement over the past few years, the housing stock still remains inadequate, poor quality especially in unplanned settlements and in some cases, totally unfit for human habitation,” said Dr Musokotwane. “This is a situation that we must collectively address.

Through savings, individuals and the nation can mobilise resources that can be channelled towards housing development. Currently 62.7 per cent of Zambian adults do not have access to any form of financial service, with rural areas having even much lower levels of service. The tendency is to use banks as pay points rather than saving for a rainy day or indeed investing in housing and other economic activities.”

And Bank of Zambia governor Dr Caleb Fundanga observed that there would be no funds available for business expansion and other key economic activities without savings.

Labels: CALEB FUNDANGA, HYPOCRISY, INTEREST RATES, LENDING RATES, SAVINGS, SITUMBEKO MUSOKOTWANE

posted by MrK @ 11:14 PM