Zambia: Central bank looks to improve relationship between banks and SMEs

Apr 30, 2015

SMEs employ 88 per cent of workers in Zambia.

The Bank of Zambia (BOZ) is encouraging commercial banks to form stronger relationships with local entrepreneurs to support the development of small and medium-sized enterprises (SMEs).

"SMEs are potentially a great source of profitable business for commercial banks which satisfies an important concern of banking business; which is to make money for investors," said BOZ deputy governor Bwalya Ng'andu, quoted by Zambia Reports.

"By dissipating the demand for foreign exchange through reduction of unnecessary consumption imports and increasing exports earnings, we will create a more stable environment in the foreign exchange market which we all so much need in order for our businesses to grow."

According to research from the BOZ, 88 per cent of the 4.1 millions of Zambians in employment work for SMEs.

However, Bwalya Ng'andu said commercial banks tend to view the SME sector as "risky," due to structural issues such the inability to manage costs, inexperienced management, poorly designed business models or no business plan and insufficient capital.

He said: "For small and medium business owners, I want to tell you this; do not expect credit from banks if you are unable to demonstrate that you have the appropriate business skills (…)For banks, my message is do not deny credit to deserving SME operators simply because you have a poor understanding of the sector".ADNFCR-2976-ID-801785758-ADNFCR