A growing number of Zambians are falling […]

A growing number of Zambians are falling victim to illegal and predatory lending practices, with some micro-lending enterprises, locally known as ‘kaloba’, charging extortionate interest rates of 50 to as high as over 100 percent per month. These rates far exceed the legal maximum of 4 percent prescribed under Zambia’s Moneylenders Act, pushing borrowers deeper into unmanageable debt.

 Speaking in an interview with the Zambian Business Times – ZBT, Economist Naylor Kopakopa, described the situation as a reflection of worsening enforcement failures in the moneylending sector, particularly among lenders operating outside the direct supervision of the Bank of Zambia (BoZ). Kopakopa noted that while microfinance institutions regulated by BoZ are largely compliant with the 4 percent cap, many lenders under the Moneylenders Act continue to flout the law, imposing illegal rates on financially vulnerable households and small businesses.

“The law is clear that moneylenders are not supposed to charge more than 4 percent per month. Anything beyond that is illegal,” Kopakopa emphasized. He explained the problem stems from a divided regulatory system: institutions licensed by BoZ are closely monitored, while other moneylenders—governed by the Moneylenders Act, fall under different government authorities, where enforcement is often lacking.

Kopakopa pointed out that many illegal lenders exploit this gap, with some charging as much as 20 to 40 percent per month, and others going even higher. This lack of oversight is not only undermining consumer protection but also driving borrowers into deeper financial hardship.

 He urged borrowers to be aware of their rights and to report any lender charging above the legal threshold to the Drug Enforcement Commission (DEC) or the Ministry of Finance. He further called for robust enforcement, arguing that authorities must take decisive action against violators to restore confidence in the sector. “Once one or two people are arrested or prosecuted, others will begin to comply,” Kopakopa asserted, stressing the urgent need for authorities to crack down on illegal moneylending practices.

The continued prevalence of illegal lending rates is a stark warning for both regulators and consumers: without decisive intervention, vulnerable Zambians will remain trapped in a cycle of debt and exploitation.

Article by Karen Ngulube