Maravi

(DAILY MAIL ZM) Cut those interest rates further

Cut those interest rates further

WHENEVER the government or the central bank implements measures aimed at reducing the cost of borrowing from our commercial banks, the response from commercial banks have often been lukewarm.

In many cases, it takes a couple of weeks before the banks can actually reduce their base lending rates and when they do so, the rates are usually not commensurate with the reduction in inflation.

About two weeks ago, the Bank of Zambia announced that it had reduced Statutory Reserve Ratios by three percent from 8 to 5 percent.

The central bank also reduced core liquid assets ratios in a measure that was expected to free K700 billion into the economy.

But a fortnight after the announcement was made by our central bank, some banks are yet to reduce their lending rates while a number of banks have actually reduced their base rates to around 16 percent, which is commendable.

But the banks, as Minister of Commerce, Trade and Industry Bob Sichinga, has said, could cut the rates down even further because not only has the central bank cut reserve ratios but the government in the 2012 budget has cut down their corporate tax from 45 to 35 percent. How good can it ever get for the sector?

Mr Sichinga has advised commercial banks to consider reducing base rates to as lower as 10 to 12 percent so that so that local businesses access more funds for investment to expand the economy.

At about 15 and 16 percent, Mr Sichinga says, it means Zambia’s base rates remain the highest in the region making it hard for our businesses to compete with other firms within the region.

But we also wonder why the banks seem to settle at almost the same base rate of around 15 to 16 percent.

Does it mean most of the banks have the same cost structures? What do these commercial banks in Zambia do anyway-we don’t see them lending out money, so what do they really do? The minister must ask this because we thought the prime role of the bank in the economy is to lend out money, something our banks clearly do not do.

Or could it be that the banks have an unwritten agreement, more like a cartel, where they agree that the interest rates should not reduce lower than a certain percentage?
Only Citibank seems to have broken this apparent tradition by lowering the base lending rates to about 13 percent. It’s a corporate lender but the gesture is good.

Neighbouring South Africa has base rates lower than five percent while in industrialised countries like Japan or the USA where governments want to stimulate growth, their interest rates are just at about one percent.

That is why we hope the Bank of Zambia is moving towards bench making interest rates so that it can actually be revising the interest as happens in the three countries we have mentioned above. Interest rates are too important to be left to commercial banks alone.

We are not saying the banks have not responded to the Bank of Zambia initiative to lower reserve ratios.

They have responded but their response is not enough.

We are sure the banks are aware that should more people access credit, they will also grow their loan books and as entreprenuers start serving with them, then they would have more customers and increase their business.

Standard Bank economists in South Africa recently enlightened us that Africa is the most under-borrowed continent, so increasing access to credit is a sure tool of empowering people so that they can invest more.

Lusaka clean up campaign commendable

IT has become perennial that whenever the rainy season starts, Lusaka residents in some places have to brace themselves against floods that come due to clogged drainages in various parts of the capital.

In the industrial area, water rises knee-high and motorists risk damaging engines, while pedestrians wade through the puddles with their trousers rolled up and shoes in their hands.

Whenever it rains in Lusaka’s light industrial area, Longolongo Road, for instance, turns into a stream and workers in the area refer to it as Longolongo river.
In some residential areas, the situation is also the same as people struggle to wade through the muddy waters.

This pathetic situation affects many townships and compounds, much to the chagrin of residents who wonder why drainages cannot be improved to bring an end to these perpetual floods.

At Kamwala Shopping Centre life is not any better and despite the millions that shop owners make, little effort has come from them to improve their own surroundings.
This is why the launch of the clean-up programme in Lusaka by Lusaka Province permanent secretary Charity Mwansa could not have come at a better time.

In fact, the launch of this programme is long overdue because the rainy season is here.

According to Lusaka City Council public relations manager Chanda Makanta, the local authority has partnered with the Zambia Prisons Service and engaged 30 casual workers under the Public Health Department plus 30 prisoners to clear the drainages.
This should go a long way in helping to address the challenges of these perennial floods in some parts of Lusaka and we hope the public can also play its role by not clogging the drainages.

The clogged drainages are a result of members of the public throwing litter anyhow and this situation needs urgent redress.

But it is not just the public that should be blamed for this because the council has not adequately deployed dustbins where the public can throw garbage.
The councils should ensure that by-laws are enforced so that people who litter public places are prosecuted.

The council’s initiative in Lusaka at the moment is commendable and if handled properly, residents in the capital city will be spared from the floods and nasty surroundings.

Labels: BOZ, INTEREST RATES, LENDING RATES, ROBERT SICHINGA

posted by MrK @ 6:56 AM