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Zambia: The Trend has Been Baffling Many Observers
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The Times of Zambia (Ndola)
EDITORIAL
28 March 2008
Posted to the web 28 March 2008
Ndola
THE trend being exhibited by financial lending institutions in Zambia has been baffling many observers for a while now.
One of the reasons for this bewilderment by would-be borrowers, observers and commentators, is that the banking sector does not appear to be responding according to given stimuli and interventions in the economy.
In standard economic theory in any market economy, certain fiscal and policy measures which are normally carefully thought out do elicit a projected or designed outcome.
Mopping excess money from circulation in an economy for instance, is a measure which is evoked to help reduce inflation.
Similarly, reducing statutory reserve ratios for banks is a measure designed to ensure that banks hold increased amounts of money in their lending portfolios for onward lending as loans.
This is precisely what the Bank of Zambia did for the local banking sector a couple of years ago.
Up to now however, the response from the sector has been contrary to expectations and the laws of economics.
It can be likened to rising prices of goods in a situation where supply has been increased.
What should happen and what is intended to happen is the reverse.
The issue of the price of mealie meal in Zambia is a case in point.
During the harvest season when maize floods the market, the price of mealie meal tends to adjust downwards and the opposite is the case during periods when maize stocks have dwindled.
It is appreciated of course that in a market economy, price levels for any commodity, of which money is one, are determined by market forces.
In the same vein, it is also appreciated that we cannot expect a mass uniform reduction in lending rates by banks because they are separate entities with varying cost structures.
What has been expected however is an appreciable measure of reciprocity in the adjustment of lending rates and any other conditions that impede access to loan financing in the country.
This quest still stands and it is the hope of the entire market that it would be fulfilled.
It is against this background that we commend the Minister of Commerce, Felix Mutati, for taking the initiative he has with the Bankers Association of Zambia and the Zambia Development Agency.
It is good that the minister will discuss the fundamental issue which has been at the centre of frustration for Small and Medium Enterprises in Zambia.
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As long as this very critical sector in our economy remains without fulfilling its full potential, efforts towards poverty alleviation may remain elusive for a long time.
It would be good if the banks individually effected some sort of a climb down so that they meet the aspirations of their clientele at some point.
There is no doubt that many stakeholders are looking forward to a fruitful outcome of the minister's meeting with the bankers.
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