Saturday, March 2, 2024

Getting Civil Servants out of the Debt Trap


By Amb. Emmanuel Mwamba

Government has announced an exciting initiative to get Civil Servants out of the debt trap that they have found themselves in.


In 2004, Government introduced financial sector reform strategy through the Financial Sector Development Plan (FSDP) as a mechanism.

The FSDP identified a range of areas for improvement in the financial sector including:

(i) levels of financial
(ii) credit culture in the market; (iii) the role of the Government in the financial sector;
(iv) the regulatory framework for Non-Bank Financial Institutions (NBFIs), insurance and pension funds;
(v) the development of the capital market;
(vi) long term development and housing finance; and
(vii) monetary policy instruments.


Following the financial reforms, there emerged a rise in payroll based credit.

A payroll loan is a general purpose loan, widely referred to as a personal or a consumer loan in which the access to credit is provided.

This is provided by both banking and non-banking financial institutions.

The loans tend to be short-term loans repaid over 1-3 months.

The loan could also be long-term with some institutions offering loans with recoveries spread to 48 or 60 month, especially for relatively large amounts.

The security undertaking is assured by the future income of the borrower hence they are granted on the basis that the borrower can prove that they will be in employment and will remain so for the foreseeable future covering the duration of the loan, hence civil servants who have security of tenure for periods considered for the loans.

The loans are used for a variety of activities, from home/land purchase to home repair, to purchasing large moveable assets such as a car to meeting daily needs as well as life-cycle expenditures such as school fees and funeral costs.

These reforms brought about the rise in payroll-based lenders in the market targeting employees in the formal sector.

Current estimates indicate that the total number of formally employed persons in Zambia is approximately 900,000, of which 500,000 work in the private sector and 270,000 work for Central or Local Government.

An additional 60,000 work for parastatals, with the remaining 70,000 working for non-governmental organisations (NGOs) or other entities.

A plethora of micro-finance institutions emerged relying heavily on civil servants’ loans and the security of recoveries done centrally through the PMEC Payroll system.

The Payroll Management and Establishment Control (PMEC) is a payroll system established to monitor and control expenditures on personal emoluments in the Public Service.

Microfinance institutions lend at higher rates of around 50-60 per cent and has led to civil servants and other workers trapped in a vicious debt cycle.


The processes being employed to help the civil servants out of a debt trap are several and include.


Here, a Civil Servant owes government and the government owes the civil servant.

The two parties cancel each other’s debt. If one of the party owes more, then the one who owes more settles the difference.


Here, Government owes a civil servant a debt for example accruing from terms of employment such as Settling Allowance, Leave Pay, Long-service bonus etc.

In this regard, Government has already started to dismantle this debt by paying out actual cash to employees who are owed. In June 2021, Government released over K200 million for this particular purpose.


In this case, Government will pay off the debt which Civil Servants owe third-party financial institutions.

Government will transfer the loans to the newly created Public Service Micro-Finance Company.

This is a Government owned micro-finance company. In this case Government will restructure the loans by lengthening the repayment period and lowering the interest rates.

Government has since frozen any loan recoveries for a period of three months as the process is undertaken.

The sum total of these measures will result in improved take-home pay for the civil servants and a path out of debt.


Payroll lending especially predatory lending perpetuated by micro-finance institutions requires regulation which should limit debt repayments and debt deductions.

But overall, the solution lie in the recovery of the economy from recession that has been pummeled by the Covid-19 pandemic and by earlier factors such as disasters, floods, droughts, energy shortage, and local and foreign debt.

What is your view?



  2. Will certainly stimulate the economy in the short term as there will be disposable income however the govt becomes more indebted & has to still raise funds to meet fiscal deficit. Short term gratification to fool the Civil service to continue to vote for PF thuggery. My advise to civil service is do take dept swap but vote with your concise on 12th Aug.

  3. Political corruption takes many forms, corrupt politiciians are parasites and should be voted OUT!

  4. Political corruption takes many forms, corrupt politicians are parasites and should be voted OUT!

  5. Microfinance institutions lend at higher rates of around 50-60 per cent and has led to civil servants and other workers trapped in a vicious debt cycle.
    This is addressing the symptoms not the causes. 50 – 60 per cent interests rates or Kaloba has been created by PF mismanagement of the economy. The level of interest in an economy is a reflection of financial discipline or financial indiscipline . Therefore , the so called vicious debt cycle, how can this be dealt with in 3months? This is long-term problem and most civil servant are insolvent.
    Hence, this requires a long-term solution of removing PF and replace it with a government that will operate financial discipline. Accordingly, interest rates , inflation and the exchange rates will be disciplined.

  6. Pf is a party for the people. We care about the hard working zambian. Vote for upnd if you want to see only the elite in society progressing

  7. Everytime I see an article with the name Amb. Emmanuel Mwamba I can not bother reading …this chap thinks he is a PF Media Director yet he is a civil servant being paid by all taxpayers …there he is talking about predatory lending perpetuated by micro-finance institutions when these are commercial banks which GRZ owes money as well and are also approved by GRZ to deduct from civil servants pay before they are paid.
    Please read this sly man’s articles with care as he hides the truth and fills them with plagiarised sources …a govt that can not pay its own debt in form of EUROBONDS is in no position to pay off your debt.

  8. The way UPND supporters reason, they believe that HH will come and sort out the mess and they have such a strong conviction about it. By the way being an economic manager is not the only qualification for one to make a good President. One has to have high level of maturity, ability to listen to advice, being a team player and must have genuine love for the people. But the way your cult leader has been flip flopping on almost anything how can he navigate the complex issues affecting the nation? The man is full of himself and everything starts and ends with him. We are better off with ECL he is much more stable and malleable.

  9. This man is just wasting time explaining what Amos Malupenga tried to do the other day. You can tell that this man knows little and he is just trying to play with words instead of explaining how he is going to help the once Mighty PF govt come out of this puzzle they created by not remitting the deductions from employees’ salaries. The likes of Emmanuel Mwamba wants to behave as though they have the monopoly of wisdom. Now things are clear ECL is losing this election because of wrong people. This man was not even known until when he became spokes personal for a former Head of State then FTJ he was very far to the center of power. This man is not even a PS, Amos Malupenga tried to explain what motivated govt to come with Debt Swap but it was not making sense. We may not be in govt but…

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