FIRST National Bank (FNB) Zambia Limited has complemented the central bank’s move to reduce monetary policy rate by also cutting the interest rate by 1.5 percent effective next month to pass on the benefits to customers.
On Wednesday, the Bank of Zambia’s Monetary Policy Committee (MPC) reduced the monetary policy rate from 15.5 percent to 14 percent.
When the central bank changes its official interest rate known as bank rate, it is attempting to influence the overall level of activity in the economy to keep the demand for, and supply of, goods and services roughly in balance.
FNB, whose interest rates range between 44 – 48 percent, says the customer facilities vary depending on their credit profile.
“FNB hereby notifies all our esteemed customers that current Kwacha borrowings that are linked to the MPC rate will decrease by 1.5 percent effective March 1, 2017,” it said in its daily newsletter.
The bank notes that the move will immediately pass on the benefit of the reduction in interest rates to customers and lower the cost of credit, hence increased economic activity in the productive sectors of the economy.
“From the monetary policy actions taken by the central bank it is clear to see that the MPC feels the local economy is set for a turnaround. Inflation has come off and looks to remain stable. The exchange rate has also been stable and has recently outperformed most expectations, with the help of flows earmarked for the bond tender,” FNB says.
It also notes that to further increase money supply, the Statutory Reserve Ratio, which is the minimum amounts certain institutions, such as financial entities and insurers, must maintain as liquid funds to avoid insolvency and are used to influence liquidity and interest rates, was also reduced from 18 percent to 15.5 percent.
FNB says the measures are aimed at increasing access to credit.
Meanwhile, Commercial banks have been challenged to reconsider their lending conditions in order to increase financial inclusion and contribute to growing the economic.
MTN Chief Executive Officer, Charles Molapisi said that unless leading rates are lowered and conditions relaxed, the economy will not be growing at its full potential.
Mr. Molapisi said this was why MTN has introduced Kongola which allows subscribers to borrow up to K750 at lending rates of between 12 and 14 percent.
Mr. Molapisi said that in the last six months MTN has lent out 56 million Kwacha to people using Kongola under mobile money, a money transfer and payment platform.
Mr Molapisi said that the repayment rate is at 98 percent with repeat borrowing hitting over 60 percent.