Zambia: BOZ to Control Annual Lending Rates

THE Bank of Zambia (BoZ) has introduced a 30 and 42 per cent seal to control annual lending interest rates charged by non-bank financial institutions on customers.

This is aimed at reducing the cost of borrowing from the micro-finance lending firms and other non-bank financial institutions licensed by the central bank.

Consequently, the effective annual lending interest rate for non-bank financial institutions designated as micro-finance service providers by the BoZ should not exceed 42 per cent.

The maximum effective annual lending rate that would be charged by all other non-bank financial institutions will be 30 per cent.

"This measure has been necessitated on account of the exorbitant interest rates that some non-bank financial institutions have continued to charge their customers.

"The capping of interest rates, therefore, is aimed at making borrowing from non-bank financial institutions more affordable and equitable, especially to the vulnerable micro-borrowers served by this sector," a statement issued by the BoZ public relations department said.

"The interest caps of 42 per cent and 30 per cent have been arrived at by multiplying the commercial bank maximum effective annual lending interest rate, which currently stands at 18.25 per cent, by factors of 2.302 and 1.644, respectively," BoZ said.

The measure is with immediate effect and conditions would apply to new loans written while existing loans would, however, be allowed to run their course on the current terms unless refinanced.

The central bank would periodically revise factors applicable to the non-bank financial institutions interest caps, in response to changes in economic fundamentals and the commercial bank rate.

In another development, BoZ has advised business entities and commercial banks against refusing to accept cheques prepared before the rebasing of the currency.

This follows reports that some business houses and commercial banks were turning away customers holding cheques issued before January 1, this year in the old currency.

The Bank said cheques issued in the old currency were legitimate and should accordingly be accepted and processed.

"The Bank, yet again, wishes to remind all business entities and commercial banks that the cheques have a validity period of six months and, therefore, cannot be deemed to be invalid because of the currency rebasing exercise.

"Cheques, therefore, should be accepted accordingly as they will be processed through the banking system by diving the amounts by 1,000 to convert the values into the rebased currency," the central bank said.

Ads by Google

Copyright © 2013 The Times of Zambia. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.