THE Bankers Association of Zambia (BAZ) is working with the Government through the Financial Sector Development Plan (FSDP) to ensure that some of the bottlenecks such as infrastructure constraints are addressed to enable banks expand to rural areas.
The association has supported Bank of Zambia (BOZ) Governor Caleb Fundanga’s call for banks and other financial institutions to establish branches in rural areas to improve financial inclusiveness and ultimately facilitate national development.
BAZ chairperson Saviour Chibiya said while financial institutions considered the economic activity in an area before investing, they also had a role to play in an economy to stimulate the same economic activity.
In response to a press query in Lusaka, Mr Chibiya said providing financial services to the unbanked communities was critical for economic growth that ultimately benefits the banks.
The banking industry has been growing with over 270 branches spread across 59 districts around the country, but more branches were required as about 13 districts were still unbanked.
“There is also room for other financial institutions such as Microfinance institutions to be established as experience in Asian countries such as Bangladesh, India and Indonesia, as well as in some Latin American countries, has shown that these institutions were suitably modelled with skills and risk management products that met the unique needs of the poor in rural areas.
Banks would complement the efforts of these microfinance institutions through capital raising and funding as well as technology,” Mr Chibiya said.
He said the cost of doing business in the country was still a challenge saying banks were not an exception.
Some of the significant costs that banks were faced with were skilled human resources as the number of branches and banks had increased, security costs for the branches and cash in transit and telecommunications especially for international communication.
Other challenges were legal costs given the average time it took to enforce contracts that, coupled by the high loan default rate currently at 15 per cent for the industry and insurance costs.
Mr Chibiya said different banks had their own strategies to try to reduce the various costs so that they become more competitive and that the benefits could then be passed on to their customers through lower charges and interest rates.
Recently, Dr Fundanga urged banks and other financial institutions to consider opening branches in areas like Chavuma, Chiengi, Gwembe, Chilubi, Lufwanyama and Mufumbwe among others to tap into the vast potential in such places.
Dr Fundanga said extending braches to far flung areas would not only improve financial inclusion but would also provide banks with new customers hence a higher deposit base.
Most banks in Zambia had concentrated their branch expansion programmes in the already banked districts.
He said the Zambian economy had shown some resilient in the midst of the global economic crisis with the Gross Domestic Product (GDP) estimated at 6.3 per cent.
Both the inflation and the yield rates on Government securities had edged downwards while the exchange rate of the Kwacha against major international currencies had also shown some stability in recent months.
Dr Fundanga appealed to financial service providers, including Access Bank Zambia Limited, to make some meaningful efforts in addressing the high cost of banking.
[Times of Zambia]
This is long overdue. A good move in the right direction though. Make sure it’s implemented rather than just another talk. :-@
I like the way Fundanga Reasons, really.
At least with his leadership the Banking Sector is ROCK SOLID IN ZAMBIA
Good Morning
At least some positive news to begin the week with. Partnerships like these make it possible to take the money where it is most needed – in the rural areas. Having overcome the worst during the financial crisis, things can only get better for us in 2010. We hope to see some development in the rural areas too as time goes by.
For some areas the idea of ‘mobile banks’ could work. On the other hand, the banks could conduct a feasibility study in the areas first before deciding to open. Yes, we need more banks but it is about business. We may end up with buildings but no customers. Moreover, the interest rates are so high in Zambia no wonder we have a high loan default rate of 15%.
#2 Betters. I agree with you. Fundanga has impressed me as well. Sometimes I think he plays a role that the Minister of Finance should play. Fundanga’s BoZ is so engaged in pushing developmental issues. Traditionally, BoZ has been reclusive.
As for banks in rural areas, I just wonder why Zanaco was not used to set up banks in those areas, when the bank was fully under govt control. Private companies are always reluctant to go to places they will not make money if at all.
Notwithstanding, Fundanga is giving it a good push. I hope the Govt will use all their levers to give himm support.
I also like the pressure Fundanga has put on banks to address high interest rates. There should be no let up. Mr Chibiya still has to convince us about cost of banking in Zambia.
#5
UK-Zed Observer
Bro, you know what, Banks are the only Institutions in Zambia that make profit as HIGH AS 250% Imagine that, Now they are TALKING about COSTS which COSTS, these Guys are SHYLOCK
onces You get involved with them you will find it Very Difficult to come out of these relationships
Fundanga has done very little in the way of necessitating personal wealth creation or SMEs for households and companies respectively. The lending rates by our financial institutions including the banks are high. We cannot afford. We need revolving funds to be created so that we can borrow at a minimum cost not these rates offered by the banks!. Most banks charge about 25% + another 3% or so. CEEC levies 13% lending rates. This is expensive money, we need to acces loans at less 10%! BOZ must act and facilitate growth in households! Until that happens I wont have kudos for Caleb!
My experience tells me that banks in general; do nothing at all that does not substantially enrich themselves. When they come along telling you how altruistic they are; that’s when my b******t instinct kicks in.