The Bank of Zambia has finally taken decisive action to stop banks from charging excessive interest rates by introducing a lending cap.
According to a statement issued by the central Bank, no bank should charge lending rates higher than 18.25 percent.
Head of Public Relations, Kanguya Mayondi said that the move is meant to make borrowing from commercial banks more affordable and equitable to different classes of borrowers.
Mr Mayondi said that the maximum effective annual lending interest rate that commercial banks can charge any borrower will not exceed 18.25 percent.
He said this cap is arrived at by adding a factor of 9 percent to the Policy Rate which currently stands at 9.25 percent.
The Bank of Zambia will periodically revise the factor applicable on the Policy Rate in response to changes in economic fundamentals and the Policy Rate itself.
This measure takes effect from the 2nd January, 2013 when these conditions will apply on new loans written.
Mr Mayondi said that existing loans will, however, be allowed to run their course on the current terms unless refinanced.
On Thursday, Vice President GUY SCOTT said lending rates in zambia are too high and are suffocating investment.
[pullquote]He, however, reiterated that some ATM machines would not be functional on January 1, 2013 as the calibration process was still underway, but that the Central Bank had instructed to ensure that the “downtime” for the machines should not be for too long.[/pullquote]
He has challenged the PTA bank and Banks of Zambia Governor, Michael Gondwe to find a solution to the problem.
Meanwhile, the Bank of Zambia has distributed the rebased Kwacha to all parts of the country in readiness for the change over on January 1, 2013.
Rebasing Project Manager, Morris Mulomba said that the central bank will use the post office network and the National savings and credit bank to disburse the new currency.
He however noted that being the rainy season, some parts of the country might experience challenges in accessing the notes.
BOZ has also discouraged the issuance of post-dated cheques before the currency rebasing programme comes into effect on January 1, 2013.
Mr Mulomba said issuance of post-dated cheques would cause problems in the banks’ systems.
“We have discouraged the issuance of post-dated cheques because post-dated cheques will cause problems. The systems in the banks will not know that this cheque was issued before the change-over date because the post-dated cheque will have a date after the change-over date,” he said.
Mr Mulomba has also assured the public not to worry about the chequebooks they were using currently as they would still remain valid after the currency was rebased and thus there was no need to change them.
Mr Mulomba explained that the same cheques and chequebooks could still be used even after January 1, 2013, but the determining factor of payment would be the date when the cheque would be issued.
He said the cheques issued before the change-over date (January 1, 2013) would be paid in the old (un-rebased) currency, but those issued after the change-over date would be paid using the rebased currency.
Mr Mulomba stated further that if a cheque was issued before the change-over date, but was presented for payment after January 1, 2013, then payment would be in the rebased currency.
“So, people shouldn’t worry, you know, they just need to put the correct date on the cheque,” he said.
He noted further that electronic payments would be the same as cheques in terms of payment as they would be dependent on when instructions would be issued.
Mr Mulomba added that there would also be no need for people to change their Automated Teller Machine (ATM) cards, but that the figures appearing on the machines would change after the change-over date, but would be indicating un-rebased currency before the change-over date.
He, however, reiterated that some ATM machines would not be functional on January 1, 2013 as the calibration process was still underway, but that the Central Bank had instructed to ensure that the “downtime” for the machines should not be for too long.
The picture looks like a swearing-in ceremony and announcement of new districts.
Kwena watekunya cos i was also thinking the same i thought its the new BOZ
Kekekekeke yes, you fun guys, I thought same too, I think now workers have adopted the sign when talking to their bosses. Every-time M.C. Sata shows up, someone is being swearing-in.
the Banks need to come down to 10%. a Team of Kabimba, Andeleki, Kambwili, Shamenda and Sakeni, can fix the banks. Banks make too much profit. They need to be squeezed like Lubinda.
A lending Cap kills market liberalization. Let the markets determine interest rates. You have an inflation rate of 7%, a policy rate of 9.25% and very unpredictable risk profiles of borrowers. BOZ should start releasing more information on the banks other than charges. What is the aggregate asset quality of the banks and what is the cost of doing business? We the public want to know whether the banks are charging too much or too low or they are within their means. What is real profitability in a bank that charges a 10% interest rate in a 7% inflation economy when you take into account the time value of money and the cost of doing business? The idea of a lending cap is not right.
Investor, shut up. This is long overdue.
EVEN THIS RATE IS JUST TOO, TOO, TOO HIGH!!!!!!
Investor I agree with you, the quality of some of the following commens show that people dont understand a free market economy. An interest rate simply reflects the risk of lending, this measure will likely lead to lower availability of credit. The government should be looking to increase competition in the banking sector and encouraging new entrants, this is what will lead to lower rates not a government official determining how much interest a privately owned bank should be charging. After all if a bank is offering an interest rate that is too high then people will not borrow there. Another economically illiterate policy from the PF government.
Those are credit card interest rates. That is why Africa is so far behind the rest of the world!!! It should be under 10% in my opinion Guy Scott knows the score..
These stuff are very difficulty for lay-men to understand, and 96% of Zambians are laymen.
This is still too high. How much interest do they pay to account holders?
Market forces go out of the window when the banks act like a cartel.
18.25% per annum is okay. Kaloba goes for 33% per month and micro finance is institutionalized kaloba with unregulated rates. Hey, but I get my loans @ less than 5% a month!
Good development ,January njikata nigwile am getting a loan.
sempre pi interessante, spiaermo che continuino a lavorarci sopra ancora un bel po’. oltretutto la grafica sembra anche migliorata rispetto le vecchie immagini.Anche the conduit ci stanno lavorando molto sodo sopra, e si vede anche dal fatto che la grafica in generale migliora sempre pi .se tanto mi da tanto, dovrebbe essere un capolavoro all’uscita.Anche perch scordatevi di avere un nuovo zelda da qui ad altri 2 anni.