Government has expressed concern with the high number of defaulters among the beneficiaries of the village banking programme in Kapiri Mposhi district.
The village banking programme is a revolving soft loan facility being implemented in the district through the Department of Community Development to boost business activities for vulnerable individual and women groups engaged in small medium enterprises (SME) in the area to reduce poverty.
But District Assistant Community Development Officer, Eunice Sunga said over 60 percent of women beneficiaries were not paying back the money which they accessed through the facility.
The facility operates on a revolving fund basis at 20 percent interest per month.
Ms. Sunga disclosed this during the district management meeting chaired by District Commissioner Peter Mwiinde.
She said the high defaulter rates were hampering the implementation of the programme which is aimed at reducing poverty and vulnerability in rural communities.
“Since 2014 when the programme came to Kapiri, we have been experiencing high defaulter rates and just this year we are at over 60 percent already which has made it difficult for us to increase the number of beneficiaries on this facility,” Ms. Sunga said.
She explained that due to the high defaulter rates, only 70 women were currently benefiting the village banking programme in the district as there was insufficient seed money to disburse.
“Generally, funds through village banking should be growing it being a revolving fund with interest but it has remained stagnant due to high default rates since it was launched it in 2014,” Ms. Sunga said.
And District Commissioner, Peter Mwiinde has directed the Department of Community Development to develop systems of recovering the money from all beneficiaries who have not yet paid back.
Mr. Mwiinde observed that the village banking programme will not achieve its objectives of ending poverty among the women and their households in the district if beneficiaries continue to default.
“I know this is a social loan paid back with interest but beneficiaries should be compelled to pay back for others to benefit if the programme is to remain relevant,” Mr. Mwiinde said.
“The facility operates on a revolving fund basis at 20 percent interest per month.”
This is robbery, someone loaning 1000 kwacha would have to repay 8916 kwacha after one year of compounding interest. No wonder people can’t pay you back.
What criteria did they use to accept who to give a loan?
The reason is obvious. Loans granted by govt agencies are never repaid as people consider them as grants. This is not just in Zambia or Africa but world over. Government should stat away from credit but instead focus on providing an enabling environment. At best, government should partner with socially oriented MFIs and NGOs such as Vision Fund and WorldVision and let them manage such funds. Even the government funded MFI Microbankers Trust failed to be sustainable.
I would encourage them not to pay back….. its your free money.
Its not enough to blame the defaulters only. Its time to question the model been used.
Govt should consult from experts in this field and adopt sustainable practices
Revolving fund and yet the Interest rate is so hing..20%? This is stealing from poor people. Reduce the interest rate to 5% and you will see that people will not default.
Esto es un abuso cobrar 20% donde estan la comisión de derechos humanos?Pobre gente como se aprovechan de su pobreza, hago un llamado a las OEA, es terrible esto, a eso le llaman ayuda para las personas mas vulnerables?