Tuesday, September 10, 2013

Govt puts foot down on lending rates
By Kabanda Chulu
Thu 15 Aug. 2013, 14:00 CAT

MICROFINANCE institutions have no choice but to reduce lending rates or sink, says finance minister Alexander Chikwanda. And Chikwanda says proceeds from the Eurobond are being used sensibly by the various institutions that received the funding.

Giving an update on the operations of the government owned micro bank that has started lending funds to civil servants at five per cent, Chikwanda said it was unacceptable for some microfinance institutions to exploit people.

"Our people have suffered a lot, and there have been situations where people are charged 50 per cent interest rate. This is unacceptable because it is exploitation and it should not continue," he said.

"Microfinance institutions will have to adjust lending rates downwards or sink because the micro bank is lending at five per cent and I am glad that they have started with rural areas where civil servants do not have access to funding."

The government has established its micro bank with a budgeted capital of K70 million although only K20 million has been disbursed so far. And Chikwanda dismissed assertions that proceeds from the Eurobond were been misapplied by recipients of the funds.

"It is true that some Eurobond money is in banks and when you talk about Zambia Railways, they negotiated for a good rate with some banks where the money is earning interest while they negotiate for contracts to rehabilitate the railway sector and there has been improvement in railway operations…trains are running and transit time has improved," said Chikwanda.

"Zesco also is putting that money to good use, as you know electricity is the driver of the economy and tenders for the Kafue Gorge are being evaluated and Development Bank of Zambia got US$ 20million which it is lending to SMEs and the Citizens Economic Empowerment Funds is also disbursing these funds so this money is being used sensibly."

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