BoZ calls on banks to open rural branches
By Mutale Kapekele
Thu 18 Feb. 2010, 09:40 CAT
BANK of Zambia governor Caleb Fundanga has called on banks to open branches in remote areas for the rural population to access financial services. And Access Bank has introduced the first-ever Visa Debit Card with a microchip and pin.
“Most banks in Zambia have concentrated their branch expansion in the already over-banked districts of our country like Lusaka,” Dr Fundanga said.
“We still have a number of districts with a lot of economic potential but without financial service providers. This entails that civil servants and other citizens in formal employment have to travel long distances and in some instances, a number of days before they can access their salaries.”
He said income-earning citizens in the informal sector like fishermen and farmers could not deposit their earnings in safe savings accounts due to the absence of bank branches.
“Most of our people cannot borrow loans to further create wealth by growing their projects,” he said.
“A number of them end up losing their income in fires, theft and other calamities. It is also common for hard working women to lose their incomes to their beer drinking husband who know where their wives keep their little savings.”
Dr Fundanga said it was a well-known fact that bank branch expansion programmes played an important role in increasing access to banking services closer to those who needed them and also improved competition among banks in Zambia while creating jobs.
“However, there is need to complement physical branch expansion with product innovation programmes that will capture a lot more people in the remote areas of the country,” he said.
He said the real challenge was for all financial sector players to play their honest part in enhancing savings mobilisation and to effectively channel the public’s savings to support financing of economic activities in all parts of the country.
“It is the Bank of Zambia’s expectation that these efforts, accompanied by the prudent risk management, will contribute to further deepening of our financial markets,” said Dr Fundanga.
“I challenge Access to open branches in places like Chilubi, Gwembe, Chavuma, Chiengi, Lufwanyama, Mufumbwe and several other places to tap into the vast potential these places possess.
This will not only improve financial inclusion but also provide you with new customers and thus a higher deposit base. I am certain that these places will be your most profitable centers as places like Lusaka will only yield narrow margins due to stiff competition.”
And Access Bank Board chairperson Caleb Mulenga has disclosed that the bank grew by 121 per cent in the last quarter of 2009.
“Access Bank’s performance in the fourth quarter of 2009 saw a remarkable growth of 121 per cent as compared to the third quarter results. This indeed was a significant stride for us,” Mulenga said.
“The Visa Debit Card to be unveiled today is the only one of its kind with safety and security of transactions due to chip and pin technology, currently the first on the Zambian market.
This card is globally accepted as a means of payment at over 29 million merchants and over one million ATMs worldwide, in over 220 countries. This no doubt uplifts Access Bank to global industry standards in banking and card services.”
Labels: BANKING, BOZ, CALEB FUNDANGA, RURAL AREAS, RURAL CREDIT FACILITY
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‘Zambia’s agriculture financing is fundamentally abnormal’
By Chiwoyu Sinyangwe
Wed 27 Jan. 2010, 04:00 CAT
ZAMBIA’s market for agriculture finance is fundamentally ‘abnormal’ with farmers saying working credit is scarce and expensive, while bankers contend that agricultural lending is risky and expensive.
And agriculture remains the single most risky lending sector for the commercial banks, with non-performing loans in the sector estimated to be around 37 per cent compared to 13 per cent across other sectors.
The agriculture sector accounts for the single largest recipient of commercial banks’ loans in the country with about US $463 million being poured into the sector at the end of last year.
This amount of financing which is about 19 per cent of all loans dispersed by commercial banks makes agriculture receive almost twice as much credit as the manufacturing sector or wholesale and retail trading sectors.
According to official statistics from the Central Bank, commercial banks had nearly K1.4 trillion US 9 million in loans denominated in kwacha outstanding to the agricultural sector as at September 2009, representing 17 per cent of all kwacha-denominated loans.
Agriculture accounts for 29 per cent of United States dollar-denominated loans, or about US $164 million as at the end of last year.
When both the US dollar and the kwacha- denominated loans are combined, the agricultural sector accounts for about 19 per cent of all commercial bank loans.
Although the agriculture sector is seemingly the biggest recipient of financing from the commercial banks, the relationship between farmers and bankers is not functioning normally.
Farmers contended that credit is scarce and expensive while commercial banks felt that lending to farmers was risky and expensive.
“Zambia’s market for agricultural financing is fundamentally dysfunctional. From the farmers’ perspective, credit is scarce and expensive,” a recent report on Zambia’s agricultural finance market has revealed. “Loan terms are too short and turnaround times too long.
These problems cause an already-risky enterprise to become even riskier. From the bankers’ perspective, agricultural lending is both risky and expensive. They commercial banks are reluctant to lend without very high collateral and a high risk premium.
When they do lend, they often lose money. The high level of non-performing loans that the banks are now experiencing represents a serious loss for them – one which will make them even more reluctant to lend in future…the agricultural finance market is caught in a self-perpetuating cycle of risk and loss, which benefits no one.”
In addition to normal risks associated with agricultural production such as weather, macroeconomic instability and price volatility, four factors were identified by the report as part of the dynamics that account for the fundamental problems in Zambia’s agricultural finance market.
The report sponsored by Zambia National Farmers Union (ZNFU) and Profit, Finance and Technology (PROFIT) stated that some of the fundamental problems cited included high risky lending environment caused largely by unpredictable government intervention as well as weakness in legal framework, limited understanding of agricultural markets and limited expertise in agricultural financing among most banks and other financial institutions, poor risk management practices and limited financial analysis and management capabilities within the agricultural sector.
Labels: AGRICULTURE, CREDIT FACILITIES, LENDING RATES, RURAL CREDIT FACILITY, ZNFU
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World Bank to embark on expansion of rural finance
Written by Nchima Nchito Jr
Friday, June 12, 2009 8:20:04 PM
LESS than one per cent of farmers in Zambia have access to credit from formal institutions, the World Bank has revealed. The Bank stated that it was in recognition of the financial crisis hitting the poorest in Africa and other parts of the world that it had embarked on a new venture to support the expansion of rural finance in the developing world
“Through a US $20 million Bill & Melinda Gates Foundation contribution, the World Bank will establish the Agriculture Finance Support Facility. In a time of tight credit, the facility will support grants to bank and non-bank institutions for activities to increase access to financial services, such as savings, credit, payments and insurance, in rural areas in developing countries as profitable business lines,” the bank stated.
And World Bank Rural Finance advisor Renate Kloeppinger-Todd stated that the facility would enable financial institutions to provide new opportunities for smallholder farmers to make productivity enhancing investments and use new technology and services.
Bill and Melinda Gates Foundation deputy director for Financial Services Carlos Cuevas stated that there was a great need among smallholder farmers, who made up the bulk of the world’s poor, for ways to save and manage their money.
“Having access to safe and reliable financial services such as savings, credit and insurance, allows poor farmers to safeguard cash, which they often receive only once a year during harvest. In this way, they can better provide for their families, prepare for emergencies, and build long term financial security,” stated Cuevas.
Even before the financial crisis, most of the over one billion smallholder farmers worldwide and many of the rural entrepreneurs of the developing world had little to no access to financial services. Since the financial crisis, access to these needed services has become even more strained.
Financial cooperatives and cooperative banks, a major source for financial services in rural areas in developed countries, have not emerged as significant service providers in most developing countries.
The World Bank provides ongoing support to many countries to improve the enabling environment for financial sector development. It also makes direct investments in rural finance. In fiscal year 2008, the World Bank committed $613 million for twenty-eight rural finance projects.
Labels: CARLOS CUEVAS, FARMERS, RURAL CREDIT FACILITY, World Bank
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Govt engages bailiffs to recover ADB’s K30bn
Written by Christopher Miti in Chipata
Friday, January 30, 2009 3:15:46 AM
THE Ministry of Agriculture in Eastern Province has engaged bailiffs to recover over K30 billion in unpaid Rural Credit Facility loans under Africa Development Bank (ADB).
And farmers in Petauke and Chama have finally received inputs under the Fertiliser Support Programme (FSP) that they did not get during the 2007/2008 farming season.
Provincial agricultural coordinator Dr Obvious Kabinda said a good number of farmers got medium term, seasonal and long term loans in 2000 and most of them did not pay back.
"There was an agreement for the seasonal. They were supposed to pay back within a year, the medium term was three years and a substantial amount of money was owed from us. Those who failed to pay we had to engage bailiffs so we just recently got the authority to go ahead so we are just now working on the documentation so that we update the records because when a good number of farmers heard that we are engaging bailiffs, they started paying back," Dr Kabinda said.
"We are updating our documents so that when the bailiffs go on the ground they should go with the exact figure which every farmer owes us and I can assure you that by the second week of February the bailiffs will be on the ground."
Dr Kabinda said the loan had gone to over K40 billion with interest and that they had recovered over K10 billion, leaving a balance of over K30 billion.
He said the large amounts of money were owed by farmers in Chipata, Petauke, Lundazi and Katete.
And Dr Kabinda said the government had finally issued 25 metric tonnes of Urea and another 25 metric tonnes of D compound fertilisers to Chama while in Petauke 42.6 metric tonnes of Urea and 42.6 metric tonnes of D compound were given to the farmers.
Dr Kabinda also said they had not yet received reports that some farmers were buying underweight fertiliser from some businessmen.
Labels: ADB, RURAL CREDIT FACILITY, RURAL FINANCE PROGRAMME
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