90% of microfinance loans given out are for consumption-Bwalya N’gandu

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BoZ Deputy Governor Bwalya Ng’andu
BoZ Deputy Governor Bwalya Ng’andu

The Bank of Zambia(BoZ) has called on microfinance institutions to expand their lending to the productive sectors of the economy and alter the concentration of their loans away from personal to business loans.

Speaking at the launch of a new microfinance institution called Microfinance Zambia in Lusaka today, BoZ Deputy Governor of Operations Dr. Bwalya N’gandu, said the microfinance institutions sector makes up the largest non-bank financial institutions subsector with asset holdings of K1, 172.2 billion as at June this year.

Dr. N’gandu explained that this represents 45.5% of overall assets of non-banking financial institutions, but that the bulk of these assets are in form of payroll based personal loans which are largely for consumption purposes.

He noted that in the banking sector, consumption related lending currently stands at 30% of the total lending, but that this is not the case in micro finance institutions where the figure stands at 90% of the subsector’s total lending.

Dr. N’gandu disclosed that the bank of Zambia will soon announce changes to the minimum capital requirements for microfinance institutions.

He explained that this is because microfinance institutions have made very little contribution to economic growth due to low capital base of the institutions.

Meanwhile, Microfinance Zambia has pledged its commitment to continue working with all stakeholders in promoting financial inclusion with the hope that this will lead to increased economic activity and wealth creation in the country.

Microfinance Zambia Chairman Dr. Rajan Mahtani said the company will ensure its systems, processes, products and services are structured around the key elements that promote economic growth.

And speaking at the same function, Microfinance Zambia chief executive officer M’kwinda Sakala said the company aims at equipping clients with meaningful capital for productive ventures.

ZANIS

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17 COMMENTS

  1. The micro loans can never be sustainable in any business sense that has to factor costs. They are too expensive hence their concentration in the payroll deduction system whic doe not focus on cost.

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  2. Thats telling; the salaries are inadequate to live on or the cost of living is rising at a very fast pace.

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  3. This isn’t new…

    This problem has been there for quite some time now,….!
    I sometimes think we Zambians (Just like myself, even when i’m not) just love to sound intelligent…..!

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  4. The DG should differiate between microfinance institutions and consumer lenders and he should not bundle the two into one basket, Most MFIs have a large portfolio lent to enterprises (MSMEs).

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  5. Mathani chair of microfinance???!! That is already wrong. He owns one of the biggest commercial banks. How can he also be in micro… its a distortion. I doubt the logic of our DG – the Psychologist teaching us Finance now!!!???

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  6. When one gets a loan for consumption, one is committing future earnings to the lender. If it’s for production, the business will probably pay the loan out. My concern is too many loans are channeled into car imports. It’s estimated about 4000 vehicles are imported into Zambia monthly. This translates into hundreds of millions of dollars per year. $100 million can build Ndola stadium.  If this was channeled to production it would make a great impact. Pull resources and ideas together and import equipment for manufacturing and import substitution instead of buying saloons cars. 

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