Chikwanda urges financial system oriented towards local entrepreneurs

COMMENT - Finance is the problem. There is a liquidity gap (difference between savings rates and lending rates) across the continent. How difficult would it be to push money into the economy through loans to MSMEs? However, it is not happening. And by the way, the IMF and World Bank like it this way, because they keep imposing conditionalities that are against the creation of a local middle class. If the PF can change this, that would be a huge step forward (it doesnt' mitigate the infusion of $1.4 billion into the economy through properly collected taxes and dividends from the mining sector though).

Chikwanda urges financial system oriented towards local entrepreneurs
By Kabanda Chulu
Mon 18 June 2012, 13:25 CAT

ZAMBIA can make an improvement in the development of the economy if the financial system is oriented towards local entrepreneurs, says finance minister Alexander Chikwanda.

Officiating at the strategic forum on the role of finance in unleashing the potential of local Zambian businesses in Lusaka, Chikwanda yesterday said the failure by most Zambians to take advantage of the immense income generating activities and the natural resources could be attributed to limited access to finance.

He said domestic credit as a percentage of GDP has averaged about 18 per cent over the last three years.

"This is lower compared to other countries in the region such as Namibia at 45 per cent and Malawi at 29 per cent. This situation further goes to explain the growing imbalances between local and foreign enterprises that usually source their investible capital funds from financial institutions outside the country at lower cost," said Chikwanda.

"There is therefore a need for banks to address the cost structures that contribute to limiting financial outreach and I expect this forum to discuss and suggest practical solutions of how this situation can be improved as the need to promote wider access to financial services through innovative financial products by various market players cannot be over emphasised."

And Bank of Zambia Governor Michael Gondwe said there was need to strategise on ways of addressing the challenges of growing local businesses aimed at facilitating income generation and job creation which were critical for poverty eradication.

And World Bank Zambia manager Kundhavi Kadiresan challenged government to develop policies and institutions that would allow the private sector to have confidence in SMEs.

"We have a keen interest in leading forward this issue of unleashing the potential of SMEs and we shall work with stakeholders not only in terms of providing money but knowledge and supporting you in every step of the way...we want to be a key player in developing SMEs in Zambia," she said.