Maravi

Incentives given to banks not benefitting poor - Yamba

Incentives given to banks not benefitting poor - Yamba
By Chiwoyu Sinyangwe
Thu 19 July 2012, 10:50 CAT

THE incentives recently given to commercial banks by the government are not improving access to financial services by the majority poor, says Secretary to the Cabinet Fredson Yamba.

And Bank of Zambia deputy governor for operations Dr Bwalya Ng'andu says hurried incentives given without an accompanying analysis of long-term benefits can result in unnecessary loss of revenue without achieving intended goals.

The duo was speaking in Lusaka yesterday at the official opening of the stakeholders workshop on the presentation of the Financial Sector Development Programme (FSDP) study report on the review of the tax regime in the financial sector.

In a quest to influence commercial banks to lend to SME and weaker members of society, the new government, on assuming power, directed BoZ to slash reserve ratios for both local and foreign currency deposits to five per cent from eight per cent previously.

The government also cut corporate tax for commercial banks from 40 per cent to 35 per cent.
But Yamba said the incentives had not resulted in buoying commercial banks' lending behaviour towards SMEs and weaker members of society.

"Although the Central Bank has in recent past taken further steps to increase the level of liquidity that banks offer for lending to private sector, the government is still concerned that access to financial services in peri-urban and rural areas and products for the lower end of the market continues to be a challenge," said Yamba. "We therefore believe that both the public and private sector need to dialogue further and consider options to improve levels of financial access in and across the country."

Earlier, Dr Ng'andu said there was need for caution when implementing tax reforms for the financial sector to ensure they achieve intended cause.

"In preparing this report, consideration was given to avoiding the temptation of thinking that producing a list of fiscal incentives is the solution to the challenge of increasing the number of people with access to financial services," said Dr Ng'andu. "All tax changes recommended are within a wider framework of other measures, including institutional ones."

Labels: BANKING, NEOLIBERALISM

posted by MrK @ 1:04 PM