Lunga DC advises best use of loans from govt
By Prince Chibawah in Mansa
Fri 14 June 2013, 14:00 CAT
LUNGA district commissioner Raphael Kauseni has challenged civil servants to take advantage of long-term loans that the government micro finance bank will be offering to invest in infrastructure development.
The government says it will establish a micro finance bank that will be giving out loans of up to KR50,000 exclusive to civil servants countrywide and currently pilot projects are being implemented in Luapula and North Western Provinces.
In an interview on Wednesday, Kauseni said the bank would give long-term, low-interest loans to government workers to help them construct houses and venture into economic activities.
"There is a wide clientele of government workers out there. This will help our officers build houses and they will have their businesses grow," Kauseni said.
He said because of shortage of government staff houses, many civil servants in the country did not have accommodation.
"This displays how the government is committed to developing Lunga district," Kauseni stated.
"The borrowing figure is up to KR50,000 and the repaying periods range from six months to 48 months. So civil servants would be choosing what suits them," Kauseni explained.
And Kauseni disclosed that seventy-eight civil servants in Lunga district had signed for the loans from the government micro finance bank.
And Kauseni bragged about leading a consortium of disciplined and self-motivated civil servants who were willing to implement all government developmental projects.
"The team of my officers has strongly showed the ability to supplement the efforts of developing the area. That's why the introduction of this particular government micro finance bank will facilitate more infrastructure development in the area," Kauseni added.
Meanwhile, Kauseni urged other senior government officials not to allow civil servants to over-borrow.
"Let me encourage especially district education board secretaries to ensure that our teachers don't over-borrow the money. Let them be checking payslips of every teacher before recommendations are made for the loan," said Kauseni.
Labels: MICRO-FINANCE, RAPHAEL KAUSENI
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Micro Finance Service Providers’s lending interest rate capped at 42% by Bank of Zambia
Time Posted: January 3, 2013 6:14 pm
The Bank of Zambia has with immediate effect introduced a cap on the effective annual lending interest rates that licensed non-bank financial institutions can charge their customers. This follows similar recent measures taken on commercial banks by the central bank.
Bank of Zambia Head of Public Relations Kanguya Mayondi in a statement released to media said that this measure has been necessitated on account of
the exorbitant interest rates that some non-bank financial institutions have continued to charge their customers.
Mr Mayondi explained that the capping of interest rates is aimed at making borrowing from non-bank financial institutions more affordable and equitable especially to the vulnerable micro-borrowers served by this sector.
He said that as a consequence, the maximum effective annual lending interest rate for non-bank financial institutions designated as microfinance service providers by the Bank of Zambia shall not exceed 42%.
He said that consequently, the Bank will designate non-bank financial institutions qualifying under this measure.
Mr Mayondi added that the maximum effective annual lending rate that will be charged by all other non-bank financial institutions will not exceed 30%.
He said that the interest caps of 42% and 30% have been arrived at by multiplying the commercial bank maximum effective annual lending interest rate, which currently stands at 18.25%, by factors of 2.302 and 1.644, respectively.
He stated that the Bank of Zambia will periodically revise the factors applicable to the non-bank financial institutions interest caps, in response to changes in economic fundamentals and the commercial bank rate.
Mr Mayondi further added that the conditions will apply to new loans written, while existing loans will be allowed to run their course on the current terms unless refinanced.
Meanwhile the Bank of Zambia has directed commercial banks and business entities to accept cheques issued prior to 1st January 2013 in the old currency.
Head of Public Relations Kanguya Mayondi said that the central bank has received reports that certain business entities and some commercial banks are turning away customers holding cheques prior to 1st January 2013 in the old currency.
Mr Mayondi said that cheques issued prior to 1st January 2013 in the old currency are just as good and should accordingly be accepted and processed.
He reminded all business entities and commercial banks that the cheques have a validity period of six months and therefore cannot be deemed to be invalid because of the currency rebasing exercise.
Mr Mayondi said that Cheques, therefore, should be accepted accordingly as they will be processed through the banking system by dividing the amounts by 1,000 to convert the values into the rebased currency.
He said that the Bank of Zambia, in this regard, wishes to remind all business entities and commercial banks that cheques issued prior to 1st January 2013 and in the old currency must be recognized and accepted as payment in order to ensure that well-meaning customers are not inconvenienced.
Labels: BANKING, KANGUYA MAYONDI, LENDING RATES, MICRO-FINANCE
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Addressing the economy's liquidity challenges: Gono
27/07/2012 00:00:00
by Gideon Gono
Following is Reserve Bank of Zimbabwe, Gideon Gono’s address to the annual congress of the Confederation of Zimbabwe Industries (CZI) in Nyanga on how to address the liquidity challenges which have continued to undermine economic recovery since dollarisation in 2009.
IT is an undisputable fact that the banking sector plays a pivotal and indispensable role in economic growth through efficient allocation of resources via financial intermediation. The intermediary role of banks can, however, be effectively played in an environment epitomized by liquidity adequacy. Additionally, improved market confidence and the smooth operation of the payment systems, largely depend on adequate liquidity in the economy.
As such, lack of liquidity in the banking system seriously undermines the stability of the financial system and results in loss of market confidence.
It is against this background that liquidity is regarded as the life blood of the economy, and in its absence financial markets cease to function efficiently. Persistent liquidity constraints in the Zimbabwean economy have resulted in reduced public confidence in the banking sector as well as increased financial disintermediation.
The adoption of the multiple currency system in January 2009 has been accompanied by persistent liquidity shortages. In this regard, attendant challenges in the banking sector are to a large extent inextricably bound to attendant liquidity conditions.
This adverse development has had debilitating effects on Government’s initiatives to firmly steer the Zimbabwean economy onto a recovery path. This reflects the negative effects repeated disruptions to the traditional mechanisms of liquidity creation and transmission, both at the aggregate and individual levels.
The negative impact of the prevailing liquidity challenges have also been felt on the inter-bank market, a key component of the money market and the starting point of the monetary transmission mechanism.
Regrettably, the potency of policy initiatives geared at enhancing access to finance has been severely undermined by liquidity constraints that have remained an albatross around economic recovery efforts. Lack of balance of payments and budgetary support as well as limited access to offshore lines of credit have also compounded the liquidity conditions.
The remedial measures to suspend disbursements to Zimbabwe on account of external payment arrears have conspired with subdued export performance and a rising import bill to amplify liquidity shortages in the economy.
Definition
To the extent that liquidity is a multi-faceted concept, the following viewpoints shape its definition:
1. The liquidity of financial instruments – the ease with which financial instruments can be exchanged for money without losing value;
2. Market liquidity – the ability to trade volumes without significantly affecting prices, (or the ease with which value can be realized from liquidation of non-cash assets without disturbing underlying prices);
3. Monetary liquidity – the quantity of fully liquid assets circulating in the economy as measured by the narrow or broad monetary aggregates or its ratio to Gross Domestic Product (GDP);
4. Funding Liquidity – the ease with which economic agents can obtain external finance. Alternatively the ability meet cash obligations when they fall due;
5. Balance Sheet Liquidity – the amount of liquid assets on balance sheets of non-financial institutions; and
6. Bank Liquidity – the ability of a bank to meet its immediate obligations as they fall due.In a nutshell, liquidity is the general level of liquid assets funding a certain level of economic activity.
If an economy has potential to grow at a targeted level, but there is insufficient liquidity to support the required production and other socio-economic activities, then economic growth is curtailed. Liquidity is therefore, critical in supporting the attainment of sustained economic growth and development.
Sources of Liquidity
It is important to note that, within the auspices of a multiple currency regime, where the Reserve Bank does not issue currency, liquidity sources are limited. In this respect, the country’s liquidity situation is contingent upon developments on the external sector front.
Other than domestic deposit mobilization, which, to a large extent, is currently limited, the major source of liquidity is export earnings, the others being:
1. Diaspora Remittances;
2. Offshore credit lines;
3. Foreign direct investment inflows; and
4. Portfolio investment inflows.
Efforts to improve the country’s liquidity conditions should, thus place great prominence on increasing confidence in the banking sector and the economy at large.Improved confidence is usually accompanied by increased investment inflows which in turn support key productive and export sectors.
This will in turn, improve liquidity conditions particularly under the multiple currency system. Zimbabwe requires adequate liquidity for both short term and long term funding for infrastructure and the productive sectors of the economy, and in particular our industries
Competitiveness
Over the past decade, Zimbabwe’s products significantly lost competitiveness in the domestic, regional and international markets. This negative development is largely attributed to relatively high production costs as a result of various factors. In addition to high utility tariffs, production processes in Zimbabwe are hamstrung by erratic supplies of water and electricity.
This ultimately translates into high production costs, resulting in delivery delays for both domestic and export orders and the competitiveness of the products in general.Some producers are forced to utilize generators to power their plants and other operations.
As a consequence, production costs incurred ends up more than trebling when compared to costs otherwise incurred when power supplies are reliable. Zimbabwe’s competitors notably, South Africa also produce Genetically Modified (GMO) products which are cheap to produce compared to Zimbabwean products.
Some of these products find their way into the Zimbabwean market, thereby, out-competing domestically produced goods.In addition, there are regulatory and policy inconsistencies, by Government regarding the competitiveness of Zimbabwean products. For instance Government allows for the importation of products, notably GMO products such as onions, tomatoes, milk, yoghurt and other milk products.
The increased importation of these products has drained the Zimbabwean economy of the much needed liquidity. South Africa, for example, produces GMO products and has reliable power supply, resulting in the products being cheaper than rival products produced domestically. Mr. Chairman, a lot has to be done to eliminate these policy contradictions which are hampering the recovery of industry.
Under the General Import and Export License, all finished products can be imported including tomatoes, onions, apples, oranges, and milk products (the list is endless). As a result, in 2011 Zimbabwe imported finished products to the tune of US$5,419.2 million compared to US$1,308.7 million. in 1999.
This has resulted in the crowding-out of Zimbabwean products with dampening effects on efforts to rejuvenate the country’s industrial production.
It is against this background that significant de-industrialization has been experienced with the manufacturing sector’s contribution to GDP contracting significantly from 25% in the 1990s to current levels of 15%. At the moment, our retail shops are filled with finished goods imported from South Africa and beyond. These are goods which we used to produce in yesteryears and export to the region and other parts of the world.
Today our goods are not competitive in the regional and in international markets. Additionally, the need for reliable power supply remains key in efforts aimed at improving the competiveness of Zimbabwean products. Against this background, Authorities have to seriously and urgently consider the development of new power generation capacity.
For years, discussions on Hwange 7 and 8 extensions, the Batoka gorge, the Kariba South extension, the Gokwe North (Sengwa) power generation plants have become theme songs.
Up to this day there has not been any tangible progress in the development of these pipe dreams. For industry to develop and increase export capacity, the economic enablers have to be functional, these include, power generation, the rail and road networks and other utilities.
The efficient delivery of these enablers will allow industry to increase production cheaply, increase exports and in turn increase liquidity in the economy.The banking sector lies at the centre of all these activities through its intermediary role of mobilizing surplus investible funds for re-deployment to deficit individuals and entities.
Banking confidence
In view of the recurrence of deep-seated liquidity challenges in our economy, the need for bold policy measures cannot be over-emphasized.At the national level, the Reserve Bank has put forward a number of short-term actions to rebuild confidence in the creditworthiness and robustness of financial institutions.
This is geared at facilitating the smooth operation of the market in terms of liquidity flow and provision of credit. The ability of banks to effectively promote economic growth hinges largely on bank soundness, efficiency and the stability of the financial sector.
As such, the Reserve Bank continues to play a proactive role to safeguard the banking sector. The bank mainly focuses on increased risk management procedures, enforcement of minimum capital adequacy, enhancement of corporate governance structures and the promotion of investment and growth.
The legal provisions governing the regulation and supervision of these institutions are set out in section 6 of the RBZ Act [Chapter 22:10], Banking Act [Chapter 24: 20], and National Payments Systems Act [Chapter 24:23].In addition, the Exchange Control Act [Chapter 22:05], empowers the Reserve Bank to regulate foreign exchange transactions in order to prevent financial instabilities arising from adverse mobility of foreign capital.
Bank capital plays a critical role of enhancing the competitiveness of banking institutions and reducing or mitigating incidences of bank failure and financial sector instability. To this end, the Reserve Bank continues to review the minimum capital requirements to ensure that banks are adequately capitalised.
Bank capitalisation
A well capitalised and sound banking institution is able to attract significant deposits and offshore financing at a reasonable cost, which translate into lower cost of funds to the productive sector. As part of its efforts to ensure that banks are adequately capitalised, the Reserve Bank has opened up the financial sector to foreign players in a bid to create strong and competitive banking institutions, thereby improving the efficiency of financial intermediation.
Consistent with this, some banks have made concerted efforts to partner with foreign banks to enhance their competiveness. To date, Premier bank has partnered with Ecobank and Kingdom Financial Holdings Limited (KFHL) concluded an agreement with Afrasia Bank Limited (ABL) domiciled in Mauritius. The Central Bank continues to encourage the mergers of financial institutions in order to build strong banks that can effectively play their intermediary role in the economy.
This ensures that bank balance sheets will be strong enough to maintain the required liquidity ratios thus enhancing confidence in the industry.Experiences in Zimbabwe demonstrate the need for effective corporate governance within the financial institutions as most bank failures are due to weaknesses in corporate governance.
Proposed amendments to the Banking Act seek to improve the legal and regulatory environment in the country, as well as tackle specific issues currently being faced by banks such as abusing depositors’ funds through insider lending.
Financial Inclusion
A substantial amount of cash is changing hands outside the banking system and this has exacerbated the liquidity challenges being experienced in the formal banking sector. The cash based transactions are mainly due to the growing informalisation of the economy. If such transactions are done through the banking system, financial intermediation would rise, thereby enhancing the ability of banks to extend credit to deficit units
.Efforts are being made by the banking sector to ensure financial inclusion of a large proportion of an unbanked population in the country through mobile banking.As at 31 January 2012, fifteen (15) banking institutions had introduced mobile banking products in partnership with mobile network operators. Financial inclusion is critical for economic growth and development, poverty alleviation and the attainment of the Millennium Development Goals (MGDs).
At the beginning of the year, the Central Bank directed banks to bring onshore Nostro account balances as part of measures to improve the liquidity situation in the economy and restore confidence in the banking sector. This measure contributed significantly in improving liquidity in the market. The challenge, however, is to ensure that the productive sectors of the economy have access to funds held locally.
Statutory Reserves
On 1 March 2012, outstanding statutory reserve balances of banks amounting to US$83.4 million were converted into Government Stock of interest rates ranging between 2.5% and 3.5%; and tenure of 2, 3 and 4 years. The effective date for the stocks was 1 January 2012 and they pay half-yearly coupon.
The first coupon payment of US$1.268 million was effected on 2 July 2012. In that respect, we are grateful to the Government for ensuring performance as this promotes market confidence. This development will ensure support for any future issues of Government instruments.
In addition, banks may be prepared to start using these instruments as collateral or start trading them thus re-activating the interbank market. Money MarketThe absence of money market instruments, in the form of Government paper, has affected the smooth functioning of the inter-bank market, as banks and market participants cannot trade without suitable and acceptable collateral instruments, to cover counterparty risks.
Mr. Chairman, we commend the Honourable Minister of Finance for his Mid – Term Fiscal Review Statement in which he announced that Government shall issue instruments to the market. The re-introduction of these instruments will resuscitate the country’s money market and unlock as well as broaden liquidity, away from its current narrow definition of cash.
This coupled with the re-activation of the interbank market is envisaged to go a long way in ameliorating the current liquidity challenges thereby fostering banking sector stability and economic growth.
The issuance of these securities will also smoothen Government cashflows through the issuance of paper when Government revenues are low and the maturity of the paper coincides with the times when revenues are higher.
The multicurrency regime has undermined the ability of the Reserve Bank to perform its traditional Lender-of-Last Resort (LOLR) function, a development which has compounded the short term liquidity constraints. Once the LOLR facility has been increased substantially from the current $7 million, the availability of collateral will result in the operation of the LOLR – thereby increasing confidence in the banking sector.
Stress Testing
Effective 31 March 2012, all banking institutions are now required to submit to the Reserve Bank, liquidity stress tests on a quarterly basis in line with Basel II requirements.
Stress tests results show the resilience of the banking sector to movements in market interest rates.Interest RatesLending rates quoted by banks have remained relatively high, largely sustained by persistent liquidity shortages, high credit demand, high associated risks, limited lines of credit and the absence of an active money market.
The absence of a functioning money market has resulted in the widening of interest rate range quoted by banks. Nominal lending rates quoted by banks range from 8% to 30% with a weighted average lending rate of between 14% and 20% during the last 4 months. Deposit rates, however, ranged from 0.15% to 6%, with time deposits offering higher rates of about 12%.
This negative development continues to militate against efforts geared at promoting a savings culture among the banking public. In turn, this compounds the country’s liquidity situation, which also hamstrings the economic recovery process.
Once an active money market is restored, it is envisaged that the rates will be aligned to an appropriate yield curve that promotes investment. In this regard, Monetary Authorities are currently engaged in discussion with the banking sector so that the industry addresses the issue of punitive bank charges and the high spread between lending and deposit rates.
The streamlining of charges has the potential to encourage the flow of savings into the formal banking system. To the banks, we encourage them to lower bank charges so as to enhance bank deposits. The banks can benefit from increased volumes of business.
Micro Finance
The Central Bank has observed the unethical and unscrupulous behavior by money lending and micro finance institutions. In response to this, the Reserve Bank of Zimbabwe issued out a circular on 4 June 2012, warning the institutions to comply with regulations governing the conduct of their business.
The Central Bank noted that some of these institutions were illegally taking deposits from the public and this constituted a leakage from the formal banking system. The public is also being warned against investing their funds with these institutions as they risk losing their savings.
The Reserve bank has so far closed two institutions for operating outside the law and is monitoring the activities of microfinance and money lending institutions. These corrective measures, coupled with the lowering of bank charges and levies have the potential to attract deposits into the formal banking system.
Continued efforts by the Monetary Authorities to restore sanity in the banking sector are envisaged to further boost confidence in the industry.External DebtZimbabwe remains in debt distress, with a total public debt of over US$10 billion.
The continued indebtedness of the country is undermining the country’s ability to attract long term finance from traditional offshore creditors.In this regard, the resolution of the country’s debt will unlock credit lines and significantly improve the country’s creditworthiness, thus complementing current efforts to attract capital flows into the key export and productive sectors.
Within this context, the adoption by the Government of Zimbabwe Accelerated Arrears Clearance, Debt and Development Strategy (ZAADDS) in March 2012, is a bold stride in the amicable resolution of the country’s overhang. Authorities are currently engaged in discussions with the International Monetary Fund (IMF) staff monitored program and the issue will be presented to the IMF Executive Board in November 2012 for consideration.
The adoption of an SMP will pave way for possible arrears and debt clearance as well as provide a signal to other lenders to engage Zimbabwe and unlock funding for the country. This will undoubtedly, result in increased capital inflows and improve liquidity conditions in the economy.
Deposit Protection
There is increasing global acknowledgement of the critical role that deposit insurance systems play in the promotion and maintenance of financial stability, which is a critical component for economic growth, financial stability and economic inclusion.An informed public that understands the benefits and limitations of deposit insurance schemes behaves rationally in the event of a bank failure.
There will be no run on banks as depositors are aware that they will be reimbursed their deposits hence contributing to the stability of the financial system. In view of this, the Deposit Protection Board (DPB) was established in July 2003 with a mandate to reimburse depositors in the event of a bank failure. The institution, however, commenced its operations in the midst of an economic crisis and has, therefore, not been able to fully play its role.
There are, however, plans to recapitalize the DPB to enable it to give some protection to depositors and be able to reimburse depositors quickly, preferably within a short period as this builds confidence in the system.
Business Models
The increase in non-performing loans has made it necessary for banks to be more prudent in their lending practices. This ensures that the sector remains stable even though lending is curtailed.
The repayment of loans by business is critical in giving the banking sector confidence and trust to enable the industry to continue providing support.In this regard, management of companies have to re-look at their business models and come up with strategies that build capacity to repay borrowed funds.
Consideration should also be given to other options such as diluting shareholding so as to bring in capital as a way of managing the liquidity challenges. Some businesses are collapsing just because owners still want to maintain full ownership and yet they are failing to mobilize funds from the banking sector.
Confidence Liquidity
Confidence is central in the growth and development matrix of an economy. Once confidence is assured, there is an incentive for people to work harder and become innovative even in an environment that is typified by negative exogenous factors.
Without confidence in an economy, financial capital will always fly out to safety, thereby undermining liquidity conditions. Mr. Chairman, we need confidence liquidity in this country in order to oil the wheels of the economy and support sustained growth.
Sense of Urgency
Certain laws and regulations need to be reviewed so as not to derail the growth momentum that the country has attained. In this regard, there is need to ensure that the country is served with pro-actively designed laws and regulations which enable productive sectors to operate in a conducive environment.
Currently, both the Authorities and the private sector have to act with a sense of urgency in order to accelerate the economic recovery process which is key in improving liquidity conditions. For instance, Authorities need to urgently review the prohibition of the transportation of certain products, notably fuel by road after 6pm.
Surely, there is no harm in allowing tankers to move fuel at night. IndigenisationThe implementation of Indigenization and Economic Empowerment regulations in the banking sector should be done in a manner that preserves confidence since any adverse developments in the banking sector could grind economic activity to a screeching halt.In this regard, we commend Government’s initiatives to re-engage in view of the Indigenization and Economic Empowerment regulations as espoused in the July 2012 Mid- Term Fiscal Policy Review.
As such, we are gratified to note that some aspects of the Indigenization and Economic Empowerment Regulations are receiving attention with a view to harmonize and fine- tune pertinent issues.
Within this context, the need to reconcile the Indigenization regulations and other Acts of Parliament cannot be over-emphasized. Accordingly, the implementation of the Indigenization and Economic Empowerment provisions cannot be done in isolation of the Banking Act and Regulations, the Reserve Bank of Zimbabwe Act, the Exchange Control Act and Regulations, the Companies Act and all other already existing legal instruments.
Conclusion
Maintenance of banking safety and soundness is essential, given the key role played by banks in facilitating economic growth. Accordingly, the current reforms in the banking sector, which place more emphasis on the need for banks to be adequately capitalised, through mergers and acquisitions will be sustained and strengthened.
A sound banking sector is critical in mobilizing funds for the growth and development of the productive sectors of the economy, creating employment and the overall benefit of the generality of the population.
Under the multi-currency system, the major source of liquidity are exports receipts. As a result, there is need for medium to long term capital to replace antiquated equipment and machinery in industry so as to produce competitive products for both export and domestic consumption.
This should see the level of import growth dissipating and exports rising. The improvement of confidence in the economy is critical in order to raise the required capital both locally and offshore.
This will support the recovery of productive sectors, create employment, improve export earnings and liquidity available for on-lending to the rest the economy for the benefit of the whole economy.
Labels: GIDEON GONO, LIQUIDITY, MICRO-FINANCE
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Workers, loan sharks and micro-lenders
By The Post
Fri 13 July 2012, 10:20 CAT
The revelation by Dr John Phiri, the Minister of Education, that over 77,000 public school teachers are shackled in debt they owe micro-finance institutions is frightening.
But they are not the only ones. Most of our working people are in a similar situation. They are in debt not only with so many micro-finance companies but also with banks, shops and other suppliers of all sorts of things.
And come pay day, they are left with nothing, they can hardly buy a bag of mealie-meal. So they have to go back to borrowing. It is not borrowing for investment; it is borrowing for consumption. Everything they have is obtained on credit.
The house they claim to own is on mortgage; the car they drive, there is a loan behind it. Sometimes even the clothes they wear are from borrowings or are purchased on credit from suppliers.
Some of our workers have consumed their salaries 20 to 30 years in advance. And this being the situation, where is their future? What happens to their families if they dropped dead today?
It is good that our Minister of Education sees this as a big problem, a gigantic challenge affecting the plight of our workers and one that demands urgent intervention. But urgent intervention by who?
This is an issue that calls for strong leadership from Dr Phiri and his colleagues in government to reform our whole system of credit and debt in the country.
This problem has not been dealt with properly over the last 20 years. Now is the time to make sure that the interests of the ordinary Zambian workers come first, not last.
For too long, our people have suffered because government policy and laws have favoured business interest above the interests of the working people.
In this country, the poor pay more interest on the little money they borrow than that paid by the rich people. Ours is a financial system that rewards the rich and punishes the poor. It is a system that makes the rich richer and the poor poorer.
Rich people can borrow from banks to start businesses, get loans for houses and cars, get credit cards, buy clothes, shoes, everything on credit and pay back from their earnings at rates they can afford. Poor people struggle to get meaningful loans from banks; they must use the money for food, school fees, transport and for emergencies like funerals.
They have to borrow from the so-called micro-lenders, the loan sharks who charge the most interests. It is not unusual for these micro-lenders to charge up to over 40 per cent or even over 60 per cent interest on small loans to poor people, workers and pensioners.
This is not in order. This is wrong.
This is shameful. This is exploitation of the workers and the poor. It is time for change. This exploitation must end.
We should not accept a system where loan sharks masquerading as responsible micro-lenders or banks steal what little our workers and the poor have in high interest charges.
The government needs to move in and set some limits on interest charges to the poor and bring it to the same level as the interest that the rich pay. This situation demands that the government acts quickly to deal with this issue. And we call on the working people, the people most exploited by loan sharks, micro-lenders and banks, to demand their own redemption.
There is need to transform our financial sector so that it meets the needs of all our people.
Transformation of important sectors of our economy is of just as much interest and importance to all workers, the users or buyers of goods and services as to the banks, the providers or suppliers of goods and services or the regulators, the government and its agencies. This is something that some in the financial sector seem to have difficulty learning.
And the trade unions need to come in. They are answerable to the workers whose interests they represent. It is therefore right to call upon the workers as a whole, and organised workers in particular, to strengthen their formations, flex their muscles.
There is need for our trade unions, our labour movement to get more involved in economic issues and policies affecting our country's economic growth and development. Workers must control their financial resources, including pension. It is time that the unilateral control and investment decision over workers' funds by the financial institutions was challenged.
A united working class must break the seemingly arrogant culture of entitlement by business to want to use workers' monies as it deems fit. And this must be located within the broader goal of deepening workers' unity in our country, and earnestly work towards the goal of returning to one country, one trade union federation.
There is increasingly more that unites the working class than divides it, including the common challenge of unemployment, retrenchments, poverty. It is only a united working class that is the social force best capable of taking our country out of a current crisis of unemployment and poverty, and lead our society towards a better life for all.
In order for this government of Michael Sata and the PF to address and effectively respond to the electoral mandate of the workers and the poor, as well as the challenge of joblessness and poverty, it is absolutely critical that they place workers' interests at the centre of transformation of our society.
In this respect, concerted effort is required if the PF government is to address poverty and joblessness. We cannot address unemployment in our country unless it is from a consistently workers' perspective and from the standpoint of its political interests.
Any approach to this problem outside the worker and the poor's perspective will not succeed.
In the light of the current high unemployment levels, one cannot fail to admit that private capital in this country has not played a meaningful role in the overall economic development of our country.
As a country, we have made more progress in those areas where government and the donors have taken a lead. Where matters have been left to the private sector, to international private capital, we have seen retrenchments and low job creation.
Therefore, there is need for the government to take a keen interest and play an active role in ensuring that all sectors of our economy are making progress and are doing so without leaving the workers and the poor behind.
Of course, we know that private capital, especially the foreign one, doesn't care about people's needs but solely about their profits! And as for our labour movement, it is important for it to realise that these are matters that should not be left to the government alone - they have an important role to play.
Labels: DEBT, JOHN PHIRI, MICRO-FINANCE, MILES SAMPA, TEACHERS
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ABC puts micro-finance for Zim on hold
Posted: Thursday, April 8, 2010 5:39 pm
ABC Holdings Limited has put on hold plans to extend micro-finance business into Zimbabwe citing the sub standard salary scale for government employees. The Group’s micro-finance project has a loan book with
40 000 customers in 17 outlets across Zambia.
“In Zimbabwe we have been given a deduction code. When government employees start getting real salaries, we will start operating there,” said Doug Munatsi the Group’s chief executive in Gaborone last month.
Zimbabwe’s economic turnaround process ignited by the inclusive Government and the use of multi-currencies, after sanctions-induced inflation eroded the value of the Zimbabwean dollar, has boosted the Group’s confidence in Zimbabwe market where they recorded a 4% growth after a ten year slump.
“We expect Zimbabwe to grow and grow aggressively particularly in 2010,” said Munatsi.
He highlighted that because of the good operational performance exhibited by the Group’s microfinance division in Zambia, the Group is reluctant to open the same operations in Botswana, Tanzania and Mozambique.
“We would have wanted to go to all the markets but there is a lot more legislation activism. We have put those markets on ice,” he said.
Following South Africa’s National Credit Act of 2007, neighbouring countries have been active on regulating the credit sector.
In Botswana to tighten the micro-finance market government has set off the Non-Bank Financial Institutions Regulatory Authority (NBFIRA) a regulatory authority responsible for the regulation and orderly market conduct of all non-bank financial institutions.
Meanwhile the Group’s outlook indicates that ABC Holdings will launch new products in Zambia and Tanzania to boost non-income interests. In 2009 the Group managed to record high non-income interest compared to 2008 following a notable rise from forex trading income and currency revaluation.
The figures rose from 29 448 million pula to 115,786 million pula.
Labels: ABC HOLDINGS, BANKING, MICRO-FINANCE
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Poverty project disburses K6bn
By Business Reporter
THE Microfinance for Poverty Reduction Project (MPRP) has disbursed approximately K6 billion in loans to various women’s groups in Lusaka urban and Chongwe over the last four years.
MPRP is a pilot collaboration programme between the Governments of Zambia and Japan, United Nations Development Programme (UNDP), United Nations Volunteers (UNV) and the Grameen Trust.
The programme is aimed at developing an effective microfinance model for poverty reduction in Zambia through capacity building of local microfinance institutions.
Micro Bankers Trust (MBT) chief executive officer, Grace Nkhuwa, said the project had reached 3, 309 poor women as at the end of July exceeding the initial target of 2, 400 women.
Speaking in Lusaka yesterday at a media briefing, Ms Nkhuwa whose organisation was one of the institutions selected to implement the project said 1, 612 beneficiaries were in Lusaka peri urban while 1, 697 were in Chongwe .
“Throughout the four years of implementation, the project maintained a zero portfolio risk, this is the first time in Zambia that a microfinance project has reported such excellent portfolio result”. she said.
She said the MPRP was designed in line with the Poverty Reduction Strategy Paper’s main goal of poverty reduction which was in line with the Millennium Development Goals (MDGs) to eradicate poverty and hunger and women empowerment.
Labels: GRAMEEN, MICRO-FINANCE, MPRP
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SMEs Ministry welcomes India, Zimbabwe project
Business Reporter
THE Ministry of Small to Medium Enterprises has welcomed the Indo-Zim project, which was launched in Harare last week. The SME project saw the procurement of around US$4 million worth of high technologies from India for use by small and medium enterprises here. In a telephone interview with Herald Business last week, Small to Medium Enterprises deputy minister Mr Kenneth Mutiwekuziva said he was thankful that the two governments signed a Memorandum of Understanding in 2006 in which India pledged US$5 million to develop SMEs in Zimbabwe.
"I thank the Government for the ‘Look East Policy’ which brought about lucrative and unconditional relationships with the East," the deputy minister said.
"This is clear testimony that the East are an all-weather friend who helped us during our colonial era and continue to help us win our economic war.
"We are happy that all SMEs, from urban areas to rural areas will be boosted since President Mugabe clearly indicated that some of the machines will be installed for rural facility centres.
"Our banks and micro-finance institutions should interact with those from India to learn more about how best they can assist our small to medium enterprises sector like they do in their country. It is my wish that this co-operation be an on-going process as well as a mutually beneficial one," said Mutiwekuziva.
Some of the machines procured have already been installed at the Indo-Zim Technology Centre, which has branches at the Harare Institute of Technology, Bulawayo Polytechnic and Small Enterprises Development Corporation’s factory shells in Chitungwiza.
Speaking at the launch last week, President Mugabe urged SMEs to take full advantage of the project to produce quality and competitive products.
He said that the project would contribute significantly to the building of the country’s industrial base as well as developing technically qualified entrepreneurs to start up businesses.
It was high time SMEs moved in tandem with global trends from being traditional and general businesses to high-tech enterprises that would increase national wealth and reduce the apparent scarcity of foreign currency, President Mugabe said.
Indian was hopeful that the launch of the Indo-Zim Project marked the beginning of continued co-operation between the two countries.
The country expressed India’s wish to have companies from that side investing in Zimbabwe in sectors like power, railways, mining, energy, dairy and agriculture. The plastic, electronics, carpentry, railway and other heavy industries are set to benefit from this project.
Labels: Indo-Zimbabwe Technology Centre, MICRO-FINANCE, SMEs
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Microfinance loans increase
By Fridah Zinyama
Saturday August 09, 2008 [04:00]
TOTAL loans in the Microfinance sector increased to over K300 billion from K11 billion in 2002 as at end June 30, 2008. According to Bank of Zambia (BoZ) Non-Bank Financial Institutions manager Musapela Phiri, the recognition by the BoZ of three tiers of Micro Finance Institutions (MFIs) has promoted financial inclusiveness in the country.
“The good policies that the bank introduced have encouraged more players to come on the scene to provide varied financial services to individuals who previously did not have access to financial services,” he said.
Phiri said some of the services provided by MFIs under these regulations include credit facilities, savings, linkage banking, in country transfers and any such other services as the central bank may prescribe.
He added that there had been an increase to K160 billion from K96 billion in the level of loans and leases in the leasing and finance sub-sector.
“This represents growing significance of the leasing sector in the economy,” Phiri said. “However, arising from a restructuring in the sub-sector, there was a noted drop in the level of loans and leases in the last two years.”
He added that the building societies had also improved considerably as the mortgage portfolio had increased to K123 billion as at June 30 this year.
“The increase in mortgages has been due to increased access to funds for onward lending through recapitalisations as well as lines of credit from commercial banks,” he said.
Phiri during the same period, deposits in the building societies sub-sector increased from K42 billion to K120 billion.
“This increase can be attributed to greater confidence in the sub-sector resulting from favourable macroeconomic environment and appropriate regulation and supervision of the sector,” he said.
Phiri added that BoZ would continue to pursue the improvement of the financial sector.
Labels: MICRO-FINANCE
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Youths urged to learn entrepreneurship skills
Posted on August 7th, 2008
The Citizens Economic Empowerment Commission (CEEC) has assured youths in the country that it has provided seed money in order to mitigate the difficulty that youths face in accessing empowerment funds from the commission. CEEC Chairperson Jacob Sikazwe reiterated that the commission has K150 billion which will be used to support broad based economic empowerment programmes for targeted citizens such as youths, women and the disabled.
Mr. Sikazwe urged youths to get close to successful business persons in the country in order to learn the best practices of managing an entrepreneurship. He said this in Lusaka today at a youth sensitization workshop on the operations of CEEC and funding guidelines organized by the Youth Association of Zambia.
And YAZ Executive Director Evans Musonda said his organized stands ready to partner with the CEEC in the area of sensitization in order to ensure that all young people access the empowerment funds.
Mr. Musonda also disclosed that his organisation has since January this year spent over K1 billion in giving loans to young people in seven provinces.
He said YAZ which works in partnership with the Copperbelt Forum will by September this year cover all districts in all the nine provinces in a bid to supplement government efforts in youth empowerment.
The two-day workshop has drawn about 30 youths from all the nine provinces and is being held at the Commonwealth Youth Programme office at the University of Zambia great east road campus.
ZANIS/BK/AM/ENDS
Labels: CEEC, ENTREPRENEURS, EVANS MUSONDA, JACOB SIKAZWE, MENTORING, MICRO-FINANCE, WORKSHOPS, YAZ, YOUTHS
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Malaysian firm to introduce microfinance model
By Chiwoyu Sinyangwe
Saturday August 02, 2008 [04:00]
COMMERCE minister Felix Mutati has disclosed that some Malaysian company is set to introduce a microfinance model that will be different from the current practice in the country. In an interview on the sidelines of the just-ended Smart Partnership Dialogue in Lusaka, Mutati could however not disclose the name of the company or the money involved. He said of all the countries that attended Smart Partnership Dialogue, Zambia would be used as a pilot project for the microfinance model.
“This network that we had during the Smart Partnership Dialogue has resulted in Malaysians saying they are starting providing training and innovation support for the microfinance to bring a workable microfinance model in Zambia,” Mutati said.
“And of all the smart partnership countries, Zambia has been picked as the first pilot project. So from a practical perspective, we can say the smart partnership is beginning to produce results.”
And Mutati also said Zambia would this October host a national symposium to discuss and localise the resolutions of the just-ended Smart Partnership Dialogue.
“Beyond this partnership, we need to sit and use this as planning process for a local indaba so that we take the issues that we discussed like energy, transportation within the context of the Vision 2030,” said Mutati.
“We will invite most of the people who attended the indaba and a lot more so that we can begin as Zambians to move the country aggressively... and unless we do that, people won’t know the value of the Smart Partnership Dialogue. We are planning to have the indaba in about two to three months from now.”
Labels: FELIX MUTATI, MICRO-FINANCE, SMART PARTNERHIPS
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Meet Microentrepreneurs from Africa
Anna Leone Mushi
Mango, Tanzania
Client of ACCION partner Akiba Commercial Bank
In the small town of Mango at the foot of Mt. Kilimanjaro, Anna works tirelessly selling rice, oil, sugar and other food products out of her tiny storefront. Before owning her store, “life was miserable,” Anna explains. There was no work, and she resorted to asking for money in the street to take care of her parents and her daughter, Irene.
With a small loan from a relative, Anna began selling mangos and vegetables at the local market, but she struggled to support her family. Desperation was never far from reality—until she heard about ACCION’s partner in Tanzania, Akiba Commercial Bank.
After forming a solidarity group with several other women, Anna received her first loan of $32 and used it to buy sweets and other small retail items, quickly making a $10 profit.
With three more loans, Anna was able to buy four pigs. She now has 8 piglets and has added meat to her array of products. She is also buying in bulk at wholesale prices, and with a consistent supply of products, she is able to maintain a loyal client base.
The family’s living conditions have improved dramatically. No one is hungry and Irene goes to school. Anna laughs as she says, “the store is now so full that it’s hard to walk in it.” She looks ahead full of hope, with plans of further education for her daughter, and continued growth of her business.
Labels: ENTREPRENEURS, MICRO-FINANCE, TANZANIA
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ZDA launches fund for micro enterprises
By Mutale Kapekele in Livingstone
Tuesday April 08, 2008 [04:00]
THE Zambia Development Agency (ZDA) has introduced a K24 billion Business Development Services (BDS) voucher for micro enterprises in four districts for three years. In an interview in Livingstone last Friday, ZDA director of micro and small enterprises division Windu Matoka said a pilot project for the fund would commence in Livingstone, Petauke, Mumbwa and Kasama districts this month.
“We have been given the funding by the Netherlands embassy who contributed K12.5 billion, the Finnish embassy K7.5 billion, the International Labour Organisation (ILO) K700 million and the government has contributed K4 billion,” Matoka said. “The fund will be managed by Madison Investments Company Ltd.”
He said the fund was meant for micro enterprises to access business development services that they normally could not afford to pay for.
“These services will include designing of business plans, accounting services and other business development services that they have no capacity to pay for,” he said.
He said ZDA had partnered with the Zambia Chamber of Small and Medium Business Association (ZCSMBA) and the Zambia National Farmers Union for the project which is expected to expand to all the districts after 2010.
“We are going to pilot in four districts for six months and then we are going to have what we are calling the establishment phase for three years and by then we hope to have replicated the pilot project to 20 districts,” Matoka said. “Depending on the success of the project, we will then expand to all districts after 2010.”
He said a two-day training workshop had been organised in Livingstone to introduce the project to the local facilitators in the district. He said similar workshops would be conducted in the other three districts in the next few days.
“We want to explain to our farmers here how the voucher fund will work and also to hear their views on the project and to see how we can best work together,” he said.
“After the workshops, we will take a team to South Africa to meet experts who are running a similar programme in that country and see what we can learn from them.
Labels: MICRO-FINANCE, ZDA
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Barclays Bank to expand microfinancing by 2010
By Bright Mukwasa
Monday March 17, 2008 [03:00]
BARCLAYS managing director Zafar Masudi has said the bank is targeting to become the largest microfinance institution in the next two years. In an interview after the tour of Lusaka city market on Saturday, Masudi said
Zambia had lots of opportunities for the creation and development of microfinance projects. Masudi said the bank was in the process of finalising a plan for the microfinance projects.
“We’re in the process of finalising the plan for the microfinance projects and our target is to become the largest microfinance bank in two years time (2010),’’ said Masudi.
He said the microfinance development programmes were crucial to the existence of the bank.
Masudi said the bank had already done preliminary planning to the development of microfinance projects and was likely to start implementing the programme in the third quarter of 2008.
He disclosed that the bank would move swiftly and strategically in taking up existing opportunities on the market and eventually capitalise on them.
Masudi further said the Zambian banking market had a promising and impressive growth, which gave the bank a lot of enthusiasm in terms of its expansion programmes.
Labels: BARCLAYS BANK, MICRO-FINANCE
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State to inject $49m into NSCB
By NANCY MWAPE
GOVERNMENT is to inject US$ 4.9 million into National Savings and Credit Bank (NSCB) through the Rural Finance Programme (RFP) aimed at increasing sustainable financial services in rural areas. Finance and National Planning Minister, Ng’andu Magande launched the RFP this week to be financed by Government with a concessional loan of US$13.8 million from the International Fund for Agricultural Development (IFAD).
And NSCB managing director, Leonard Mwanza said management had developed an institutional development plan that outlined the number of branches to be opened this year. Mr Mwanza said 20 branches would be opened under the first phase of rural financing programme. He added that the bank’s aim was to have a presence in the 72 branches of the country.
The RFP has five components that include development of community based financial institutions with an allocation of US$2.3 million, US$4.9 million for promotion of rural banking services and a credit facility for contracted small scale production to be allocated US$ 4.5 million.
According to an appraisal report on the RFP, US$1.5 million would be allocated to innovation and outreach facility that would provide support to financial intermediaries to reduce the initial risk of offering services in rural areas and encourage innovative financial products.
Government has also allocated US$3.5 million for policy, institutional and management support that would be closely aligned with policy initiatives being developed under the Financial Sector Development Programme.
According to the RFP appraisal report, US$4.9 million for NSCB would support expansion of rural banking. The report adds that Government’s commitment to the recapitalisation would be in the form of a US$1.3 million debt or equity swap and US$1.2 million cash injection into the
bank.
IFAD’s contribution to the recapitalisation would constitute investment in the bank’s expansion of rural branches, procurement of a new computerised accounting system and professional support to improve management and operating procedures.
The report adds that the support would make it possible for NSCB to develop into a sound financial institution capable of servicing rural areas with savings, loans and money transfer products.
Labels: IFAD, MICRO-FINANCE, RURAL FINANCE PROGRAMME
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Poor people are not a liability, says Mugabe
By Chansa Kabwela, Kingsley Kaswende and George Chellah in Hara
Thursday June 21, 2007 [04:00]
ZIMBABWEAN President Robert Mugabe has said poor people are not a liability to society. And Reserve Bank of Zimbabwe (RBZ) governor Dr Gideon Gono has said the central bank will spend Z$32 billion (US $128 million; US $1=Z$250) to support microfinance and money lending institutions in the country.
Opening a regional meeting on measuring performance of micro-finance institutions at Harare 's Rainbow Towers Hotel yesterday, President Mugabe said a paradigm shift was needed to recognise that poor people were not a liability but an untapped resource and potential contributors to economic development.
President Mugabe said there was a misconception in most developing countries of regarding all poor clients as risky and less profitable. "Since governments and donors have only limited capacity to meet this supply shortfall, we need to involve micro-finance institutions that can mobilise resources locally. However, we need to be clear that micro-finance is not charity. It is instead a way to extend basic rights, affordable credit and services to low income households," he said.
President Mugabe said there was need to note the intricate relationship between poverty and gender especially with particular reference to women.
He said women and children in most cases bear the brunt of poverty as they were in some societies and cultures disadvantaged both educationally and traditionally, with their economic capabilities despised.
"Micro-finance therefore provides improved and more realistic opportunities to create jobs for women and their families, a situation that is favoured by many since women generally prove to be more honest and focused borrowers. For us to meet the target set under the third Millennium Development Goal, that is of promoting gender and empowering women, more resources should be channeled towards improving the role of micro-finance institutions," President Mugabe said.
"While micro-finance is expanding, key challenges emerge and these include the need for product diversification, capacity building and lesser donor dependency. This makes it necessary to transform and integrate the micro-finance sector into the formal financial system. In Africa, for example, micro-finance institutions are striving to increase outreach and sustainability and have adopted micro-finance approaches such as savings and credit unions, cooperatives and even non-governmental organisations that provide credit. However, given their lack of access to resources and the challenges of macroeconomic conditions, many micro-finance institutions have remained dependent on external assistance."
President Mugabe said there was need for all people to fight poverty in Africa. He explained that in many countries, including Zimbabwe, micro-finance had proved its value as a weapon against poverty and hunger. President Mugabe said ordinary but hardworking people with access to micro-finance could build up assets and protect themselves against unexpected setbacks and losses through savings and small loans.
"They can also move beyond mere day-to-day survival and attain the capacity to better plan for the future and invest in better housing, improved health and better education, hence reducing their vulnerability to the vicious challenge of poverty. It is the duty of governments and that of all stakeholders in the development process to make micro-credit a tool to reach the 900 million people who make up the world's poor," he said.
President Mugabe said the current economic challenges had given rise to the emergence and subsequent growth of many micro-finance institutions which had endeavoured to fill the gap created by deficiencies in the traditional banking system. President Mugabe said Zimbabwe takes the micro-finance sector seriously and had since raised its profile by placing it under the ambit of the central government.
And Dr Gono said the RBZ had earlier released Z$16 billion (US $56 million) which has all been taken up and that it was adding another Z$16 billion.
"So far the RBZ has disbursed Z$7.6 billion or 46 per cent of the Z$16 billion disbursed to date. Many of the beneficiaries were in the agriculture sector such as livestock, poultry and commodity broking. Applications were also received from the mining and manufacturing sectors, which included food processing and brick moulding," he said.
"The Z$16 billion has all been taken up and I would like to announce that we are releasing another Z$16 billion for the same purpose. This is necessitated by your (President Mugabe's) visit to some of them and your comments to them."
Dr Gono said the central bank had so far registered 257 microfinance and money lending institutions since it embarked on regulatory reforms for the industry in 2004."
He said before then, the industry was prone to indiscipline and it became imperative for the RBZ to take control. Dr Gono said SMEs contribute 50 per cent to the Zimbabwe's GDP and support 80 per cent of the population in a country of 13 million people.
He said RBZ would continue with appropriate lending to the microfinance sector in its monetary interventions, as the sector was a bridge to the gap that banks have left in the economy in its current situation.
Harare Metropolitan Province governor David Karimanzira said micro-finance has been changing people's lives since the beginning of trade. Karimanzira said people were able to support their families after accessing small loans from micro-finance institutions thereby helping to reduce poverty and contributing to Zimbabwe's economic development.
Labels: MICRO-FINANCE, MUGABE, SMEs, ZIMBABWE
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