Despite positive economic indicators, such as an […]

Despite positive economic indicators, such as an 18% appreciation of the kwacha, international gross reserves exceeding $6 billion, and single-digit inflation within the 6-8% target band, Zambia’s private sector continues to face challenges accessing affordable credit due to persistently high lending rates. Financial sector experts argue that, given the country’s macroeconomic stability, lending rates should now be more favorable for borrowers,particularly for small and medium enterprises (SMEs) that drive much of Zambia’s economic growth.

Economic expert Trevor Hambayi told the Zambian Business Times (ZBT) that improving access to capital is crucial for accelerating GDP growth, especially as approximately 97% of Zambia’s private sector comprises SMEs.

 “GDP growth requires liquidity, which depends on the availability of funds at interest rates that are favorable to borrowers. It is essential that resources are made accessible to support private sector development,” Hambayi said.

 He emphasized that access to credit is not just about availability, but also about the affordability of funds through lower interest rates. “Four out of five jobs in emerging economies like Zambia are created by SMEs. Supporting them is key to driving employment and economic recovery.”

 Hambayi recommended policy adjustments to encourage banks to allocate at least 10% of their portfolios to SME financing, as well as the creation of special concessionary windows to offer lower rates for these enterprises.

 He further noted that achieving lower lending rates will require the Bank of Zambia to reduce its monetary policy rate, which should be reflected in commercial banks’ lending rates to SMEs. “To make interest rates more favorable, the central bank must continue to lower the monetary policy rate. This will help ensure banks offer more competitive rates, especially to SMEs,” Hambayi added. As Zambia’s economy stabilizes, stakeholders are urging targeted reforms to ensure that lending conditions support the private sector’s potential to drive broad-based economic growth.

Article by Justine Phiri