Banks say they recognise need to reduce lending rates
By Henry Sinyangwe
Mon 10 Dec. 2012, 08:50 CAT
COMMERCIAL banks in the country say they recognise the need to reduce lending rates following government's introduction of the monetary policy rate.
Vice-President Guy Scott recently during the Zambia International Business Advisory Council in Lusaka expressed worry at the high lending rates being charged by commercial banks despite the introduction of a policy rate being implemented by the central bank.
At inception, the Bank of Zambia set the policy rate at nine per cent, but has since been adjusted to 9.25 per cent.
But Bankers Association of Zambia chief executive officer David Chewe said there is a recognition that lending rates should be brought down considering the introduction of the transparent mechanism such as the monetary policy rate.
He attributed the prevalent high interest rates to the non-transparent mechanisms in the past years.
"We need interest rates to go down, but we are coming from a background where there was no transparent mechanism and now with the introduction of a transparent mechanism, we hope that we can quickly see that realignment happening and see the interest rates lowered," Chewe said.
He claimed that the policy adjustments that the Bank of Zambia has implemented had also resulted into the lending rates reducing.
"…We have started a journey where we are now seeing a realignment of the various imperfections that existed in the past to an extent that we are trying to look at what has transpired in the industry and relate it to the budget. What we have highlighted is that the policy adjustments that the Bank of Zambia has implemented have resulted into the lending rates reducing and we have been able to see the lending rates reducing from about 24.6 per cent to about 18," Chewe claimed.
He said the association had been negotiating with various stakeholders and the banks to ensure that the corporate tax was also reduced.
"As a result of the collaboration that we had with the BoZ and the Ministry of Finance, we had the corporate tax rate reduced from 40 to 35 per cent; that was because of engagement and discussion with an understanding that the corporate tax rate was going to result in the banks adjusting their lending rates," Chewe said.
"There was the discussion of measures relating to the statutory reserve ratio which was part of the initial pointers that we had identified and subsequently, there was a policy rate that was introduced and the policy rate was meant to be a more transparent mechanism for transmitting monetary policy."
He further claimed that the average lending rate had reduced to 16 per cent, which was a clear indication that rates have been going down.
"For the small to medium enterprises, the lending rates have also reduced, they range between 14 and 21 per cent in banks that have participated in submitting the data that we submit to government," said Chewe.
"On the deposit side, when you look at the aggregate deposit that the banks have been able to mobilise, the total picture is that 80 per cent of the deposits are in current account meaning that the owner of the account would want to have access to money and that would not warrant any interest."
Labels: BANKING, DAVID CHEWE, GUY SCOTT, INTEREST RATES, LENDING RATES
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Libor Is Not the Only Manipulated Economic Number: Core Economic Figures Twisted and Manipulated
by Washington's Blog
Global Research, July 15, 2012
Washington's Blog
Many Other Core Economic Figures Manipulated As Well
The Telegraph noted Monday:
[Bank of England executive] Paul Tucker told MPs that Barclays’ abuse of the Libor system may be only one part of the banks’ dishonesty over crucial financial information, suggesting that other markets should now be investigated.
An official inquiry into Libor – which helps determine interest rates for householders and businesses – should be broadened to include several over markets where banks are trusted to report their own data, he said.
***
The Libor scandal could be repeated in a number of other “self-certifying” markets where prices are determined, he said.
“Self-certification is clearly open to abuse, so this could occur elsewhere,” he said.
A Financial Services Authority inquiry into Libor should be extended to other self-certifying markets, he said. The Treasury said last night that the review, led by Martin Wheatley, was free to examine markets other than Libor.
An expansion of the FSA review could take in a number of other interest-rate-related data as well as some complex financial instruments measuring the difference between banks’ borrowing costs and that of the US government. [i.e. the Ted spread]. Some markets in gold and oil are also based on self-certification.
Mainstream commentators are starting to publicly discuss manipulation in the precious metals markets. See this, this and this.
Avery Goldman noted last year:
On March 15, 2011, the Commodity Exchange (COMEX) and the New York Mercantile Exchange (NYMEX) advised the CFTC that they had approved J.P. Morgan’s application to become a licensed vault facility, using a “self-certification” process. The newly licensed vault, located at 1 Chase Manhattan Plaza, NY, NY, is ready to roll as both “weighmaster” and depository, for delivery of gold, silver, platinum and palladium contracts, as of March 17, 2011, two days later.”
ETFs, bullion banks, storage facilities and other holders of gold that are “self-certifying” – without any checks by third party auditors – have been caught misreporting and raiding even allocated precious metals accounts, and using the loot to speculate or pay off other debts.
As such, manipulation in the self-certifying portions of the oil and gold markets could have a huge impact on assessing the true health of financial institutions, the economy as a whole, and the assets of individual investors.
There have also been allegations that the self-certifying derivatives indicator – iSwap – has been massively manipulated. See this and this.
Indeed, given the massive fraud committed by the big financial players over the course of many years – and the shear scope and audacity of the Libor scam – it is safe to assume that most self-certifying markets are gamed.
Postscript: Of course, even when there are third-party auditors, many of them are in on the fraud as well.
And many accuse government personnel of inaccurate reporting concerning such fundamental numbers as unemployment, (and see this and this), bank debts, inflation, gpd, and money supply.
Indeed, the U.S. and British governments seem to have encouraged interest rate manipulation.
The problem is not just giant, corrupt corporations. Nor is it just giant, corrupt government. It is the the malignant symbiotic relationship between government and corporations against which people worldwide are struggling.
Washington's Blog is a frequent contributor to Global Research. Global Research Articles by Washington's Blog
Labels: INTEREST RATES
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Why is Nobody Freaking Out About the LIBOR Banking Scandal?
POSTED: July 3, 9:04 AM ET
The LIBOR manipulation story has exploded into a major scandal overseas. The CEO of Barclays, Bob Diamond, has resigned in disgrace; his was the first of what will undoubtedly be many major banks to walk the regulatory plank for fixing the interbank exchange rate. The Labor party is demanding a sweeping criminal investigation. Mervyn King, Governor of the Bank of England, responded the way a real public official should (i.e. not like Ben Bernanke), blasting the banks:
It is time to do something about the banking system…Many people in the banking industry are hardworking and feel badly let down by some of their colleagues and leaders. It goes to the culture and the structure of banks: the excessive compensation, the shoddy treatment of customers, the deceitful manipulation of a key interest rate, and today, news of yet another mis-selling scandal.
The furor is over revelations that Barclays, the Royal Bank of Scotland, and other banks were monkeying with at least $10 trillion in loans (The Wall Street Journal is calculating that that LIBOR affects $800 trillion worth of contracts).
The banks gamed LIBOR for two semi-overlapping reasons. As noted here last week, there were instances of Barclays traders badgering the LIBOR submitters to "push down" rates in order to fatten their immediate bottom lines, depending on what they were trading or holding that day. They also apparently rigged LIBOR downward in order to produce a general appearance of better health, essentially tweaking their credit scores a few ticks upward.
Most intriguingly, or perhaps disturbingly, there were revelations last week that Bank of England deputy Governor Paul Tucker had a conversation with Diamond at the peak of the crisis in 2008. The conversation reportedly left Diamond, and subsequently his traders, with the impression that the bank had carte blanche to rig LIBOR downward in order to help allay spiraling public fears about the banks’ poor financial health.
British officials, and Tucker individually, deny that Tucker gave Diamond permission to rig rates. But a report by British regulators did conclude that the two were talking about Barclays LIBOR submissions on October 29, 2008, and that as a result of that conversation, Diamond came away with a “misunderstanding.” The Daily Mail quotes the Financial Services Authority report:
However, as the substance of the telephone conversation was relayed down the chain of command at Barclays, a misunderstanding or miscommunication occurred.
This meant that Barclays’ submitters believed mistakenly that they were operating under an instruction from the Bank of England (as conveyed by senior management) to reduce Barclays’ Libor submissions.
That is explosive stuff. Members of Parliament will be grilling Tucker tomorrow about those events in what is sure to be a far more combative and entertaining legislative inquiry than the Jamie Dimon dog-and-pony show we just went through here in the states in recent weeks.
The implications of that part of the story should be particularly chilling to Americans, who in recent years have been party to a number of revelations about strange and seemingly inappropriate contacts between senior regulatory officials and big bankers during the heat of the crisis.
We know that American officials in 2008-2009 were extremely concerned about the appearance of weakness in the financial markets, so much so that they may have resisted pursuing criminal prosecutions against big banks, and we also know that they spent a lot of time commiserating with Wall Street figures before and during the crisis.
If Bob Diamond and Paul Tucker were having these talks about LIBOR, is it fair to wonder what else Hank Paulson and Lloyd Blankfein were talking about in the 24 discussions they had in the six days following the AIG disaster? When Paulson had a secret meeting with the entire board of Goldman Sachs in, of all places, his hotel suite in Moscow, in June of 2008? Or what other material nonpublic information was exchanged when Paulson met with a gang of hedge fund chiefs at the offices of Eton Park management in July 2008, and laid out for them a possible scenario for putting Fannie and Freddie into receivership?
Anyway, the LIBOR story is leading the front pages of most of Britain’s dailies, it’s on TV, and it’s producing blistering editorials and howls of outrage amongst politicians and activists. But as compadre Yves Smith at Naked Capitalism put it, where’s the outrage here in America?
The big story on our shores in the last few weeks has been the health care ruling, which makes sense, but then after that… what? The heat? Tom and Katie? (There’s actually a story about how Katie can wear heels again, now that she’s not married to a short person). Joe Sandusky? Nightline’s big story tonight, which is already being hyped on the net, is about how fat Chris Christie is and why the hell he hasn’t done the bypass surgery yet:
New Jersey Gov. Chris Christie opened up about his weight problem in an interview with ABC News and stressed he is "trying" to lose weight, a battle he's waged for 30 years, but said he's never considered gastric bypass surgery because it's "too risky."
"I mean, see, listen, I think there's a fundamental misunderstanding among people regarding weight and regarding all those things that go into, to people being overweight," Christie said in an interview that will air Tuesday on "Nightline."
Glad to be informed! The New York Times, meanwhile, did chime in with a house editorial yesterday, and it was appropriately somber. And there has been some coverage in the financial press.
But to me what’s missing from all of this is the “Holy Fucking Shit!” factor. This story is so outrageous that it shocks even the most cynical Wall Street observers. I have a friend who works on Wall Street who for years has been trolling through the stream of financial corruption stories with bemusement, darkly enjoying the spectacle as though the whole post-crisis news arc has been like one long, beautifully-acted, intensely believable sequel to Goodfellas. But even he is just stunned to the point of near-speechlessness by the LIBOR thing. “It’s like finding out that the whole world is on quicksand,” he says.
So as far as the stateside press goes, I’ve got to assume the cavalry is coming soon. But when?
Labels: BANKING, GREAT DEPRESSION II, INTEREST RATES
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Things That Make You Go Hmmm - Such As The Transition From Conspiracy Theory To Conspiracy Fact
Submitted by Tyler Durden on 07/08/2012 21:57 -0400
From Grant Williams, author of Things That Make You Go Hmmm,
Attempts to manipulate free markets invariably end badly - after all, they are, supposedly, by their very nature, free ....
Over the past few weeks, the exposure of the Libor-rigging scandal has monopolized the headlines of the financial press and inveigled its way onto the front pages of every major news publication in the world through the sheer size and scale of the story.
Something as big as this just CAN’T be hidden from the public.
Only... it can.
It has been. It no doubt still is to a certain extent. I’m not going to go through all of the events of the past few weeks as you are no doubt familiar with them, but [simply understanding how LIBOR works makes for a simple conclusion].
I’m afraid it’s rather obvious. Given that almost half the reported inputs that help establish the Libor rate are discarded immediately, Barclays simply CANNOT have manipulated the Libor rate alone. Period.
What’s more, to effectively ensure the rate is set at the price required, you’d need to not only establish the highest and lowest 25% of prices, but then ensure the remaining 50% average out to the required rate and, based on the fact that there are 16 banks that submit rates, that would mean about 13 of the 16 involved would need to be complicit.
As a very good friend of mine put it earlier this week; at best this is a cartel, at worst it’s outright fraud on a scale that is completely unprecedented.
So for five years there have been attempts to fix the Libor rate and, take it from me, during that time, many inside the financial industry were familiar with the rumors of such manipulation but it was another huge scandal with such highpowered connected interests that it would no doubt be brushed squarely under the carpet. Forget ‘too big to fail’. This was ‘too deep to prove’.
Libor is so important to so many people in the financial industry that the question of why it was manipulated really ought to be framed differently:
Assuming you COULD manipulate something as important and potentially beneficial as the Libor rate with such ease for years, why wouldn’t you?
The answer to this question would ordinarily be:
"Because it’s illegal and government regulators would throw the book at us"
...
So, working from the ground up; we have a set of traders looking to produce the best profits they can for personal gain, the major bank they work for and who should be supervising them with a need to disguise the level of its own funding costs and above them all, a government seeking to keep borrowing costs down in the middle of a gigantic financial storm. From such alignments of interest are the greatest of conspiracies born.
In my humble opinion, the Libor scandal (which has a LONG way to go before it has played out and which will claim a LOT more scalps) will mark a fundamental change in the treatment of financial conspiracy theories in the media. The sheer amount of coverage it will undoubtedly receive will signal a shift in attitude towards the exposing of such scandals rather than the blind-eyes that have been regularly turned in recent years.
...
But perhaps, most-of-all, watching how quickly those in high places begin to throw each other under the bus, it will hasten the end of many other possible government conspiracies as exposing such events becomes an exercise in self-preservation. Prime amongst conspiracy theories that may soon be finally proven to be either valid or the figments of overactive imaginations, are those alleged in the gold and silver markets.
The allegations concerning precious metal price manipulation predate those surrounding Libor by decades but until now day they have remained similarly acknowledged within financial circles and ignored without. That may well be about to change.
Unencumbered by liability, the rising price of gold has always been a barometer of governmental failure to protect the purchasing power of fiat currency and the best indication of the damage that inflation does.
Forget inexorably rising gold prices. Forget the corrections that shake loose hands from the wheel at every turn. In the broader context they carry far less relevance than the intrinsic values that gold provides a consistent yardstick to.
A look at the value of assets measured in ounces of gold remains the most consistent way to get a sense of their real value and the charts below demonstrate all too clearly the true performance of the Dow Jones Industrial Average and average US house prices over the long term when measured in gold ounces.
If the long-stated claims about government-sanctioned, bank-led manipulation of precious metals markets put forward so eloquently by the likes of Ted Butler, Bill Murphy & Chris Powell at GATA as well as Messrs. Sprott, Sinclair, Davies et al are eventually proven to have any validity whatsoever, the fallout from the Libor scandal will prove to be (to use the words of Jamie Dimon) just another “tempest in a tea pot” as the precious metals are the very underpinnings of the entire global financial system. Conspiracy or no, it would be a blessed relief to get closure no matter what the truth turns out to be.
As for the full note by Grant Williams, which has much more in it, it can be found below (pdf):
Hmmm Jul 08 2012
Labels: INTEREST RATES
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Rate-rigging scandal won't affect us - BAZ
By Chiwoyu Sinyangwe
Fri 06 July 2012, 13:25 CAT
BANKERS Association of Zambia says the expanding rate-rigging scandal which led to the resignations of two senior Barclays executives will not affect the local operations.
And ratings agency Moody's has cut Barclays standalone bank financial strength to negative from stable, citing the resignations of senior executives - chief executive Bob Diamond and chief operating officer Jerry del Missier - in the wake of an interest rate-rigging scandal.
Barclays, the UK's second-largest bank by assets, was fined a record 290 million pounds on June 25 for rigging Libor.
Chairman Marcus Agius has also announced his intention to leave once successors are found.
Driven by the culture of greed that analysts and market watchers say has poisoned the entire financial industry, reprehensive Barclays traders in the UK colluded with others to manipulate the London Interbank Offered Rate (Libor), the rate that big banks say they borrow on from each other which underpins trillions of dollars in global contracts.
In addition to the manipulation by traders, which took place from 2005-2009, Barclays has also admitted to deliberately understating its submissions of Libor rates at the height of the 2008 financial crisis to make its balance sheet look stronger.
UK newspapers have highlighted e-mails disclosed in the case which show traders congratulating each other for fiddling figures with promises of bottles of champagne.
Libor is a benchmark interest rate for pricing trillions of dollars of conventional loans and sophisticated products such as swaps.
The bankers declined to be identified because they were not authorised to speak for the company.
Libor is calculated by a survey of banks' daily estimates of how much it would cost them to borrow from one another for different time frames and in different currencies.
Because submissions are not based on real trades, the potential exists for the benchmark to be manipulated by traders.
Barclays which trades locally as Barclays Bank Zambia tried to manipulate the benchmark for profit, and to mask its difficulty in borrowing money during the credit crisis of 2000-2009.
The Barclays accord is the first in an investigation by regulators around the globe that has ensnared at least 12 banks, including Citigroup, HSBC Holdings, UBS, Credit Suisse Group and the Royal Bank of Scotland Group.
But BAZ chairperson Charity Lumpa said no bank can manipulate the lending system employed by the Bank of Zambia.
"Whereas Barclays Bank in the UK managed to manipulate the Libor rate, it is not something that any bank can do in Zambia," Lumpa said an emailed response to a query. "This is because the Central Bank sets the Monetary Policy Rate against which all banks set their lending rates. This is in itself provides assurance against any manipulation by the commercial banks."
BoZ only introduced a benchmark interest rate last April to replace the money-supply targeting that has since been its major policy lever.
Since the liberalisation of the economy in 1991, the country had largely the floatation system which analysts say weakened BoZ's ability to monitor and influence the way interbank lending rate was done as the financial markets lacked a credible and stable anchor for setting interest rates.
Labels: BANKERS ASSOCIATION OF ZAMBIA, CORRUPTION, INTEREST RATES
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Investrust welcomes BoZ's 9% lending rates benchmark
By Joan Chirwa-Ngoma
Mon 02 Apr. 2012, 13:00 CAT
INVESTRUST Bank says BoZ's setting of benchmark lending rates at nine per cent will reveal the Central Bank's monetary policy stance.
Welcoming the development yesterday, Investrust Bank managing director Friday Ndhlovu said the Bank of Zambia's decision will signal to the market its intentions regarding money supply, inflation rate expectation and other market factors that help in the determination of lending interest rates by commercial banks.
The Bank of Zambia has set the country's inaugural benchmark interest rate at nine per cent in a policy shift intended to broaden financial markets and augment ongoing government efforts to lower lending rates.
Last Monday, it announced the introduction of a Policy Rate, named BOZ
Policy Rate, effective today, April 2, 2012, to replace the money supply targeting that has previously been its major policy tool.
The policy rate allows BoZ to clearly signal its monetary policy stance to the market, providing financial market participants with a credible and stable anchor for setting of interest rates on their credit products.
The economic indicators that would guide BoZ Policy Rate adjustments, include, among others, output, expected inflation and the exchange rate.
"However, for it to succeed, government policy must be consistent and this must reflect in the intentions signalled by the central bank through the policy rate so as to avoid volatility in interest rates and other economic variables such as inflation. Interest rates volatility and unstable inflation would cause foreign players to shun the Zambian financial market due to high uncertainty risk," Ndhlovu said in an emailed statement issued by the bank's public relations manager Ackim Mwale.
"This could cause significant turmoil in the financial Market and could be difficult to reverse in the short term as has been the case in other markets that have adopted similar policies."
Ndhlovu warned that without consistency in policy direction, pricing for term lending would prove difficult for both lenders and borrowers as they would be unable to price the expected volatility with reasonable certainty.
"This is because the policy rate is determined using short term variables and in this case the policy rate will be reviewed monthly. It follows therefore that one can only be certain over a one month horizon," said Ndhlovu.
"Nevertheless, it will help to make interbank activity more efficient and transparent. For the public, it is important that the policy rate is not construed as the rate at which the borrowing public will access credit but is an indicative rate at which commercial banks will transact amongst each other and borrow at from the Central Bank as lender of last resort, within prescribed margins. This rate will be reviewed monthly depending on what the Central Bank wants to achieve as they implement monetary policy. Commercial banks will add their own margins which will vary from client to client depending on perceived risk."
Labels: BOZ, FRIDAY NDHLOVU, INTEREST RATES, INVESTRUST BANK PLC, LENDING RATES
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Bank of Zambia sets benchmark interest rate at 9%
TIME PUBLISHED - Friday, March 30, 2012, 4:40 am
Bank of Zambia yesterday rolled out a monetary policy framework to replace money-supply targeting, setting the inaugural benchmark interest rate at 9 percent, which analysts said signalled significant monetary tightening. The rate will come into effect on April 2.
International analysts said the new benchmark represented monetary tightening, most notably because the central bank’s overnight lending facility – the rate it charges commercial banks as a lender of last resort – is due to be set at 250 basis points above the policy rate.
“This is a significant tightening,” said Razia Khan, head of Africa research at Standard Chartered in London. “From levels of around 6 percent previously, overnight rates should now fluctuate within a 7-11 percent band.”
The new rate, which has been in the pipeline for more than two years, should also add more transparency to what is already an attractive frontier market for international bond investors chasing after high yields.
Unlike its counterparts in East Africa, Zambia has managed to keep a lid on inflation in the last 12 months, due in part to the relative stability of its currency, the kwacha, against the dollar.
However, since populist opposition leader Michael Sata was elected president in September, the kwacha has weakened from around 5,000 to 5,300 amid concerns about more state pressure on foreign investors, particularly in the mining sector.
Bank of Zambia (BoZ) deputy governor Bwalya Ng’andu said the effect of kwacha weakness posed a risk to non-food inflation, although stable food prices in the rapidly expanding agricultural producer should moderate the overall picture.
“The bank has weighed the inflation risks and has determined that average inflation during the policy-related period would remain below 7 percent,” he told a news conference to announce the new rate.
Under Sata’s predecessor, Rupiah Banda, the central bank had made clear it wanted to introduce a benchmark interest rate, although Sata’s firing of BoZ governor Caleb Fundanga shortly after taking office had cast doubt on those plans.
One of Sata’s policy priorities has been to cut the cost of credit for Zambia’s businesses and its 13 million people in order to stimulate growth beyond the mining sector.
With the reforms, Zambia is marching in the footsteps of other frontier African states, most recently Uganda, which launched a benchmark rate and inflation target last July to tame inflation that had soared to a 17-year high of 16 percent.
The new policy took time to bed down, and inflation shot up to more than 30 percent in the final quarter of 2011 before a flood of foreign cash into high-yielding domestic debt reversed a slump in the shilling, cutting the cost of imports
[Reuters]
Labels: BOZ, INTEREST RATES, LENDING RATES, STANCHART
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BoZ to introduce fixed interest benchmark
By Chiwoyu Sinyangwe
Wed 28 Mar. 2012, 13:00 CAT
THE Bank of Zambia has introduced a fixed benchmark interest rate, in a policy shift intended to broaden financial markets and augment ongoing government efforts to lower commercial bank lending rates.
The policy rate would allow BoZ to clearly signal its monetary policy stance to the market, providing financial market participants with a credible and stable anchor for setting of interest rates on their credit products.
The country has operated an open market system since it liberalised economic policies in the early 1990s.
Under the current regime, Zambian commercial banks determine their own lending rates without any official reference point.
Since coming into power, the Patriotic Front has announced sweeping reforms to the monetary policy management, with a view to lowering the cost of lending in the country to ease access to working capital by local entrepreneurs.
Some of the changes announced by the government included lowering the reserve ratio for both local and foreign currency deposits to five per cent from eight per cent previously.
To boost the fall in lending rates, the government also reduced the corporate tax for the banking sector from the previous 40 per cent to 35 per cent to provide more liquidity to the local commercial banks "to lend cheaply".
In a statement yesterday, BoZ head of public relations Kanguya Mayondi announced a BOZ policy rate with effect from April 2, 2012.
"A policy rate is utilised to influence monetary and credit conditions in an economy. This policy rate will, in this regard, allow the BoZ to signal an increase or a decrease in the price of credit in the market," Mayondi stated.
"To announce changes to the BoZ Policy Rate, the Bank of Zambia will be issuing a monthly communiqué covering, among other things, factors taken into account when arriving at its decision on the BoZ Policy Rate as a means of explaining its monetary policy stance. The first BoZ Policy Rate shall be announced on Thursday, March 29, 2012."
Mayondi stated that increased reliance on interest rate policy-based instruments was expected to provide a relatively more transparent and efficient process through which BoZ could better anchor inflation expectations.
"Following this reform, it is expected that the standard practice of quoting the price of loans and similar credit products by all commercial banks will be BoZ Policy Rate plus a margin," he stated.
"The margin will be set by commercial banks on the basis of their risk premium assessments. This transparent way of pricing credit products will enhance many stakeholders' business planning processes and assist in efficiently managing their financial commitments. Further, this will enable borrowers to understand the basis upon which commercial banks price their credit products."
Mayondi stated that the Central Bank, in collaboration with other stakeholders, would continue to work on building an effective and efficient financial system which is expected to benefit all stakeholders accordingly.
Labels: BOZ, INTEREST RATES, LENDING RATES
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‘Statutory reserve ratios cut may not benefit SMEs'
By Chiwoyu Sinyangwe
Tue 08 Nov. 2011, 10:50 CAT
THERE is no guarantee that the reduction in the statutory reserve ratio for cash deposit will translate into lower cost of borrowing for small entrepreneurs, says economic commentator Chibamba Kanyama.
Kanyama said contrary to the government's intention of empowering Small and Medium Entrepreneurs (SMEs) through reduced cost of borrowing, the reduction in the statutory reserve ratios for cash deposits from nine per cent to six per cent might just benefit commercial banks and big companies.
The Bank of Zambia (BoZ) last week slashed its reserve ratios to cut the cost of borrowing for commercial banks and consumers in a bid to stimulate economic growth among SMEs.
BoZ also reduced the reserve ratio for both local and foreign currency deposits to five per cent from eight per cent previously.
In an interview, Kanyama described the slashing of the statutory reserve ratio as a "bold step" that was likely to translate into a dramatic downward shift in interest rates charged by commercial banks.
Some commercial banks in the country have announced a reduction in base lending rates in response to the government's recent monetary policy adjustments.
"The base rates are the minimum interest rates charged while giving out loans before other charges are computed," Kanyama said.
"In Zambia, base rates are generally benchmarked against treasury bills, but banks will charge as high as five percentage points above the TB rate. The real winners in this case are the large corporate entities with a long borrowing history whereas the SMEs, who are the focus of government in this initiative, will still have to bear with high interest rates. Worse still, Zambian banks have the tendency to craft loan agreements to favour them in the event that market conditions governing interest rates move."
Kanyama regretted that companies already on the loan book would still have to service the loans based on old rates and any efforts to refinance their loans to take advantage of the current reductions would yield very little in view of charges to be levied on them in management fees.
And Kanyama cautioned that pumping over K800 billion about two per cent of the value of the national budget might pose inflationary pressures, resulting in some marginal erosion of investor confidence.
The BoZ said the cut in reserve limits should inject K700 billion into the domestic banking system.
"As we release the clutch plate of cash injection, one hand should be on the handbrake to manage potential repercussions and this will require an effective use of open market operations, by issuing treasury bills," Kanyama said.
Last week, Bankers Association of Zambia chairperson Mizinga Melu said increased liquidity in the market would in the short term result in commercial banks scrambling for limited treasury bills or government securities on offer, but played down the likely inflationary pressures from the huge liquidity expected to be injected in this week.
And Kanyama said the government was likely to double the deficit financing from 1.7 per cent of gross domestic product to 3.5 per cent of gross domestic product for its budget likely to be around K25 trillion.
Labels: BANKING, BOZ, CHIBAMBA KANYAMA, INTEREST RATES, SMEs
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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
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Time for an Economic Bill of Rights
by Ellen Brown
Global Research, November 11, 2011
Web of Debt - 2011-11-09
Henry Ford said, “It is well enough that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” We are beginning to understand, and Occupy Wall Street looks like the beginning of the revolution.
We are beginning to understand that our money is created, not by the government, but by banks. Many authorities have confirmed this, including the Federal Reserve itself. The only money the government creates today are coins, which compose less than one ten-thousandth of the money supply. Federal Reserve Notes, or dollar bills, are issued by Federal Reserve Banks, all twelve of which are owned by the private banks in their district. Most of our money comes into circulation as bank loans, and it comes with an interest charge attached.
According to Margrit Kennedy, a German researcher who has studied this issue extensively, interest now composes 40% of the cost of everything we buy. We don’t see it on the sales slips, but interest is exacted at every stage of production. Suppliers need to take out loans to pay for labor and materials, before they have a product to sell.
For government projects, Kennedy found that the average cost of interest is 50%. If the government owned the banks, it could keep the interest and get these projects at half price. That means governments—state and federal—could double the number of projects they could afford, without costing the taxpayers a single penny more than we are paying now.
This opens up exciting possibilities. Federal and state governments could fund all sorts of things we think we can’t afford now, simply by owning their own banks. They could fund something Franklin D. Roosevelt and Martin Luther King dreamt of—an Economic Bill of Rights.
A Vision for Tomorrow
In his first inaugural address in 1933, Roosevelt criticized the sort of near-sighted Wall Street greed that precipitated the Great Depression. He said, “They only know the rules of a generation of self-seekers. They have no vision, and where there is no vision the people perish.”
Roosevelt’s own vision reached its sharpest focus in 1944, when he called for a Second Bill of Rights. He said:
This Republic had its beginning, and grew to its present strength, under the protection of certain inalienable political rights . . . . They were our rights to life and liberty.
As our nation has grown in size and stature, however—as our industrial economy expanded—these political rights proved inadequate to assure us equality in the pursuit of happiness.
He then enumerated the economic rights he thought needed to be added to the Bill of Rights. They included:
The right to a job;
The right to earn enough to pay for food and clothing;
The right of businessmen to be free of unfair competition and domination by monopolies;
The right to a decent home;
The right to adequate medical care and the opportunity to enjoy good health;
The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment;
The right to a good education.
Times have changed since the first Bill of Rights was added to the Constitution in 1791. When the country was founded, people could stake out some land, build a house on it, farm it, and be self-sufficient. The Great Depression saw people turned out of their homes and living in the streets—a phenomenon we are seeing again today. Few people now own their own homes. Even if you have signed a mortgage, you will be in debt peonage to the bank for 30 years or so before you can claim the home as your own.
Health needs have changed too. In 1791, foods were natural and nutrient-rich, and outdoor exercise was built into the lifestyle. Degenerative diseases such as cancer and heart disease were rare. Today, health insurance for some people can cost as much as rent.
Then there are college loans, which collectively now exceed a trillion dollars, more even than credit card debt. Students are coming out of universities not just without jobs but carrying a debt of $20,000 or so on their backs. For medical students and other post-graduate students, it can be $100,000 or more. Again, that’s as much as a mortgage, with no house to show for it. The justification for incurring these debts was supposed to be that the students would get better jobs when they graduated, but now jobs are scarce.
After World War II, the G.I. Bill provided returning servicemen with free college tuition, as well as cheap home loans and business loans. It was called “the G.I. Bill of Rights.” Studies have shown that the G.I. Bill paid for itself seven times over and is one of the most lucrative investments the government ever made.
The government could do that again—without increasing taxes or the federal debt. It could do it by recovering the power to create money from Wall Street and the financial services industry, which now claim a whopping 40% of everything we buy.
An Updated Constitution for a New Millennium
Banks acquired the power to create money by default, when Congress declined to claim it at the Constitutional Convention in 1787. The Constitution says only that “Congress shall have the power to coin money [and] regulate the power thereof.” The Founders left out not just paper money but checkbook money, credit card money, money market funds, and other forms of exchange that make up the money supply today. All of them are created by private financial institutions, and they all come into the economy as loans with interest attached.
Governments—state and federal—could bypass the interest tab by setting up their own publicly-owned banks. Banking would become a public utility, a tool for promoting productivity and trade rather than for extracting wealth from the debtor class.
Congress could go further: it could reclaim the power to issue money from the banks and fund its budget directly. It could do this, in fact, without changing any laws. Congress is empowered to “coin money,” and the Constitution sets no limit on the face amount of the coins. Congress could issue a few one-trillion dollar coins, deposit them in an account, and start writing checks.
The Fed’s own figures show that the money supply has shrunk by $3 trillion since 2008. That sum could be spent into the economy without inflating prices. Three trillion dollars could go a long way toward providing the jobs and social services necessary to fulfill an Economic Bill of Rights. Guaranteeing employment to anyone willing and able to work would increase GDP, allowing the money supply to expand even further without inflating prices, since supply and demand would increase together.
Modernizing the Bill of Rights
As Bob Dylan said, “The times they are a’changin’.” Revolutionary times call for revolutionary solutions and an updated social contract. Apple and Microsoft update their programs every year. We are trying to fit a highly complex modern monetary scheme into a constitutional framework that is 200 years old.
After President Roosevelt died in 1945, his vision for an Economic Bill of Rights was kept alive by Martin Luther King. “True compassion,” King declared, “is more than flinging a coin to a beggar; it comes to see that an edifice which produces beggars needs restructuring.”
MLK too has now passed away, but his vision has been carried on by a variety of money reform groups. The government as “employer of last resort,” guaranteeing a living wage to anyone who wants to work, is a basic platform of Modern Monetary Theory (MMT). An MMT website declares that by “[e]nding the enormous unearned profits acquired by the means of the privatization of our sovereign currency. . . [i]t is possible to have truly full employment without causing inflation.”
What was sufficient for a simple agrarian economy does not provide an adequate framework for freedom and democracy today. We need an Economic Bill of Rights, and we need to end the privatization of the national currency. Only when the privilege of creating the national money supply is returned to the people can we have a government that is truly of the people, by the people and for the people.
Ellen Brown is an attorney and president of the Public Banking Institute, http://PublicBankingInstitute.org. In Web of Debt, her latest of eleven books, she shows how a private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are http://WebofDebt.com and http://EllenBrown.com.
Ellen Brown is a frequent contributor to Global Research.
Labels: BANKING, DEBT, INTEREST RATES
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Bank of Zambia slash reserve ratios to cut cost of borrowing for commercial banks and customers
TIME PUBLISHED - Tuesday, November 1, 2011, 9:09 pm
Bank of Zambia has slashed its reserve ratios on Tuesday to cut the cost of borrowing for commercial banks and consumers in a bid to stimulate economic growth in Africa’s biggest copper producer.
The Bank of Zambia (BoZ) said the reserve ratio for both local and foreign currency deposits would be 5.0 percent from 8 percent previously, while the core liquid assets ratio would go down to 6 percent from 9 percent. The bank also said it would continue to work towards introducing a policy rate as a benchmark for determining interest rates.
Since his surprise election in September, President Michael Sata has made it clear he wants to cut the cost of credit to bring more Zambians into the economy, although investors have worried it could lead to higher inflation.
The BoZ said the cut in reserve limits should inject 700 billion Zambian kwacha ($142 million) into the banking system, but analysts said it was not overly aggressive easing given that the original 8 percent was high by African standards.
For instance, Kenya’s central bank said on Tuesday it was raising its cash reserve ratio by 50 basis points to 5.25 percent from Dec. 12 as part of an concerted effort to control runaway inflation.
“We know that they want to reduce bank lending rates, and when you have a very high cash reserve ratio, it does add to the cost of doing business,” said Leon Myburgh, an Africa analyst at Citibank in Johannesburg.
[Reuters]
Labels: BANKING, BOZ, INTEREST RATES
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Zambian govt to push banks to cut lending rates
Fri Sep 30, 2011 11:02am GMT
LUSAKA, Sept 30 (Reuters) - New Zambian finance minister Alexander Chikwanda said on Friday interest rates in Africa's biggest copper producer were too high, and he would be pushing banks to cut the cost of borrowing to boost economic growth.
Chikwanda also said rates were inconsistent with inflation, which quickened to 8.8 percent in September.
"The government will advocate for pro-growth interest rates by dialoguing with the banking sector in understanding the factors that have led to the current prohibitive interest rates," Chikwanda said in a Ministry of Finance statement.
(Reporting by Chris Mfula; Editing by Ed Cropley)
Labels: BANKING, INTEREST RATES, LENDING RATES
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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
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Banks and interest rates
By Editor
Wed 27 Jan. 2010, 04:00 CAT
IT is undeniable that a reliable and innovative banking sector is the lifeblood of any economy. And if finance is the lifeblood of our economy, the figuring out of new ways to pump blood through the economy should foster investment, entrepreneurialism, and progress.
The debate about high interest rates in the country and the failure by local commercial banks to foster investment, entrepreneurialism, and progress has been with us for a long time. It has been a thorn in the flesh of most entrepreneurs.
While this trend has been going on, we have seen commercial banks become inefficient and lazy, preferring to deal with mostly, the almost risk-free government securities – only succeeding in adequately crowding out our fragile but crucial private sector. This has also led to stagnation in financial inclusions and development of new products and services to deepen the growth and role of the financial sector in the development of our economy.
Not even the previous approach by the Bank of Zambia (BoZ) of applying moral persuasion in pleading with commercial banks to reduce lending rates has helped to improve the cost and accessibility of working capital for most local entrepreneurs and domestic investors.
Against that background, there is need to pay serious attention to the new development being touted for the financial sector this year by BoZ.
We have recently seen a positive shift in a number of policies in respect to financial markets.
Firstly, the government intends to change its monetary policy from monitoring the inflation rates to start using the interest rates.
In countries where inflation is used as a monetary policy tool, we see that when annual inflation rates move, similar movement occurs in interest rates.
Ironically in our case, this tool was not effective. We are not aloof to what happened last year when inflation rates moved from over 14 per cent at the beginning of the year to close the year at 9.9 per cent. Notwithstanding this development, most commercial banks remained obstinate and refused to move their lending rates in tandem with the movements in inflationary dynamics.
We also saw that even the few banks that responded to the improvement in the inflation rate, there is a huge discrepancy between what the inflation rate is and their base rates.
In the current scenario, inflation stands at 9.9 per cent yet the lowest base rate we know of stands at 19 per cent. This is a very huge discrepancy, which is totally unacceptable.
Therefore, the move by BoZ to now use interest rates as a monetary policy tool is very welcome. Banks base rates will now be relative to the BoZ rate. The Central Bank needs and deserves support on this matter.
Government has also decided to close most of its accounts with commercial banks and come up with one single Treasury account at BoZ. This is a good thing to a large extent. We have seen commercial banks getting government money, invest in government securities and make profit on the same government money! So basically the government gives money to a bank and goes back to borrow the same money through government bonds and Treasury Bills. Therefore, the idea to consolidate these accounts is good. This will help government to have a holistic view of its cash-flows.
However, the fact that the Treasury account will be at Central Bank poses a challenge. We say so because we fully understand that this new development will mean that BoZ will now begin offering commercial banking services to the government ministries and other spending agencies.
This may be in conflict with their primary role of being the regulator. And in case of a dispute between the BoZ and the payee, who arbitrates?
Further, by these funds being held at BoZ, it means that a certain amount of liquidity is removed from commercial banks and this will affect the lending.
There is certainly need for the Central Bank to clearly state how it is going to manage any cases of liquidity stress on some banks as a result of the mopping of the government money because we know that public funds form a substantial amount of liquidity in the local banking sector.
But the good side to this is that commercial banks in the country will be forced to put attractive conditions to compete for clients as their funds will be dependent on deposits unlike the current situation where banks could possibly run without individual customers because they get huge deposits from the government.
All in all, the move to close most of the government accounts among other monetary polices being peddled by the government through the Central Bank is positive and needs to be supported.
Labels: BANKING, INTEREST RATES, LENDING RATES, NEOLIBERALISM
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BAZ endorses wholesale base rates
By Chiwoyu Sinyangwe
Fri 04 Dec. 2009, 04:00 CAT
THE introduction of wholesale base rates in the country will help to reduce misunderstandings between commercial banks and customers over interest rates, Bankers Association of Zambia (BAZ) chairman Saviour Chibiya has observed.
Central Bank has indicated that it will next year abandon the open market system it had pursued since the liberalisation of economic policies in the early 1990s. Under the current regime,
Zambian commercial banks determine their own lending rates without any official reference point.
Commenting on the announcement by the Bank of Zambia (BoZ) that it would next year introduce a wholesale lending rate, Chibiya said a policy shift would facilitate further development of the financial markets in Zambia.
“The absence of this window in the local market has in the past led to difficulty in agreeing on a widely accepted reference rate as banks would typically refer to their own Base Rates whilst some customers did not fully agree on the determination of such an interest rate,” Chibiya said.
“Banks also had to discount their Treasury Bills or borrow in the interbank market when they have a normal short term liquidity requirement and these rates could be punitive and quite unpredictable depending on the timing.”
Chibiya, who is also managing director for Citibank Zambia, further said the new monetary policy would in turn help enhance liquidity in the local financial sector.
“This window at the Central Bank will therefore aid liquidity management of the banks and hopefully have a positive influence on overall interest rates,” said Chibiya.
“In principle we are pleased with this development and we await to see the implementation.”
BoZ deputy governor for operations Denny Kalyalya said the fixed rate system would allow the Central Bank to influence lending rates commercial banks charge.
Simultaneously, as part of the new monetary shift, the Central Bank this month introduced an overnight lending facility, which Kalyalya said would enable BoZ to provide liquidity to the market whenever necessary.
Labels: BANKERS ASSOCIATION OF ZAMBIA, INTEREST RATES, LENDING RATES, WHOLESALE BASE RATES
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Commercial banks have responsibility to nurture agriculture sector – Melu
Written by Florence Bupe
Wednesday, August 05, 2009 3:01:10 PM
STANDARD Chartered Bank managing director Mizinga Melu has said commercial banks have the responsibility to nurture Zambia's agriculture sector as a tool for economic growth.
Speaking at the just-ended Agricultural and Commercial Show, Melu said banks should help fund the agriculture sector in order to foster economic growth through enhancing sector operations.
“Agriculture is vital for this country's economic growth, and it is up to the banks to nurture this sector through increased funding and offering the right loan tenure. We believe that agribusiness is crucial for the sustainable economic development of both Zambia and Africa,” she said.
Melu disclosed that Standard Chartered Bank had established a commodity traders and agriculture team aimed at increasing the bank's understanding of agriculture issues.
She observed that economic diversification in Africa as a whole, and Zambia in particular, was vital and that agriculture should be the centre of diversification efforts.
“Economic diversification in Africa remains vital and agriculture must become a central pillar of this economic strategy,” she said.
She disclosed that Standard Chartered Bank, in partnership with the German Development Finance Institution, had provided financial support totalling 100 million Euros to the agriculture sector in sub- Saharan Africa over the last three years.
Melu pledged continued support to the agriculture sector through funding and equipment provision.
Labels: AGRICULTURE, INTEREST RATES, LENDING RATES, MIZINGA MELU, STANCHART
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Reduce the cost of banking in Zambia- Fundanga
Saturday, July 11, 2009, 9:14
Bank of Zambia (BOZ) Governor Caleb Fundanga says it is important for commercial banks in the country to operate in a manner that supports growth and development of the country’s economy.
Dr. Fundanga said it was therefore important for commercial banks to lower the cost of banking and offer attractive banking services to the public.
The Central Bank chief said the general cost of banking services in Zambia should be made affordable to the general public.
He was speaking at the foundation laying stone ceremony of the new Stanbic bank offices in the Show grounds in Lusaka.
Dr Fundanga noted that the investment that is being made by Stanbic bank would have a positive impact on the economy due to the evident linkages that infrastructure development has on various sectors of the economy.
He pointed out that the repositioning by the bank is one way of ensuring that there is healthy competition in the banking industry.
Stanbic bank chief executive Ben Kruger said Stanbic is committed to service the people on the African continent.
Mr. Kruger said Stanbic is an African Bank that has a unique understanding of African business.
ZANIS
Labels: BANKING, BEN KRUGER, BOZ, CALEB FUNDANGA, INTEREST RATES, LENDING RATES
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Lack of financial services hindering rural development – Musokotwane
Written by Florence Bupe in Lukulu
Friday, May 29, 2009 4:40:17 PM
FINANCE minister Dr Situmbeko Musokotwane has observed that the lack of financial services has continued to be a major hindrance to rural development. And Bank of Zambia (BOZ) governor Dr Caleb Fundanga has urged commercial banks to price their services in accordance with their respective customers’ economic status.
During the official opening of the National Savings and Credit Bank (Natsave) branch in Lukulu district on Wednesday, Dr Musokotwane (left) said the absence of banking services in rural areas was a challenge to business communities and government departments. He specifically noted that the absence of banks in Lukulu since independence had greatly slowed down development in the area.
“The absence of a bank in Lukulu has been a very big challenge not only to the private sector but also the various government departments,” Dr Musokotwane said. “This has been slowing down economic activity and the implementation of developmental projects in the area.”
Natsave is the first and only bank in Lukulu district. Dr Musokotwane expressed optimism that the establishment of a bank in the area would increase investment opportunities.
He observed that although Lukulu had the potential for investment, investors were unwilling to take business to the area due to inadequate infrastructure, including banks.
Dr Musokotwane disclosed that the government had since 2004 pumped over K19 billion into Natsave Bank as capital and pledged continued investment to improve banking services in rural areas and enhance development.
“Very elaborate government policy is already in place under the Rural Finance Programme. Since 2004, the government has injected K19.3 billion as capital, bringing the total equity investment by government to K21 billion,” he said.
Dr Musokotwane hoped that local businesses in Lukulu would now have access to loans in order to grow their businesses.
And in a speech read for him by Bank of Zambia director for non banking services supervision Chisha Mwanakatwe, Dr Fundanga said it was important that financial service providers complemented branch expansion with increased product innovation.
He said the key element to poverty reduction was financial service inclusion.
“A key element in the strategy of poverty reduction is the provision of financial services to the majority of our people, including micro-enterprises, who have traditionally been neglected by the formal banking sector,” said Dr Fundanga.
Meanwhile, Natsave board director Godfridah Sumaili said the newly opened Lukulu branch was expected to break-even within 12 months and become profitable in 18 months.
Labels: BANKING, CALEB FUNDANGA, INTEREST RATES, RURAL AREAS, SITUMBEKO MUSOKOTWANE
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COMMENT - At 23%, the commercial bank's lending rates are
usurious. Even the bible condemns usury.
Govt should compel banks to cut rates – Chingambo
Written by Chiwoyu Sinyangwe in Chisamba
Monday, May 25, 2009 3:13:46 PM
THERE is need to put in place policies that will compel commercial banks in the country to reduce interest rates instead of lobbying them, Professor Lloyd Chingambo has said.
Professor Chingambo, who is Lloyds Financial Services chief executive officer, charged that
commercial banks were only interested in growing their wealth and not the nation’s economy.
Chingambo, who also accused the local financial institutions of not being innovative in the manner they handled risk in real sectors like agriculture, said there was need for the government to spearhead the provision of finance for development.
"Commercial banks in the country are not pro-growth. That is the fact...they are not just willing. They are not interested in growing the economy and that is why you see they are interested in supporting projects that involve trading and not real sectors like agriculture,” Prof Chingambo said.
"...in terms of reducing the cost of borrowing money, you don’t ask them [commercial banks] to reduce the interest rates because they don’t want, instead you put in policies and programmes that would put pressure on them [to reduce interest rates]."
The Central Bank and finance minister Dr Situmbeko Musokotwane have continued to condemn the high interest rates in the country, urging commercial banks to make the cost of borrowing affordable to help stimulate the economy and support growth of the real sector.
The Central Bank recently also reduced the statutory reserve ratios from 14 to eight per cent to help increase liquidity in the market and reduce the cost of borrowing.
But commercial banks have continued to resist any downward adjustments with the countryís interest rates averaging 23 per cent.
And Prof Chingambo said there was need for the government to take bigger role in facilitating finance for development.
He called for the establishment of the Venture Capital Fund (VCF) as a way of increasing financing especially to small scale farmers.
"The financial sector is just so risk averse and that is why they are not supporting the agriculture sector. There is need for banks to develop alternative ways of dealing with risk,” said Prof Chingambo. “You can’t treat the same risk today the way you did 20 years ago."
Labels: BANKING, INTEREST RATES, LLOYD CHINGAMBO
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