THE Zambia Association of Chambers of Commerce and Industry (ZACCI) has commended the Bank of Zambia (BoZ) for instituting a cap of 42 per cent on the effective annual interest rates that microfinance institutions charge.

ZACCI vice-president for South, Chabuka Kawesha said the move will offer an opportunity for the business community to realise their industrialisation plans.

He said the chamber had received the news of the introduction of a cap of 42 per cent on the annual interest rates that non-bank financial institutions charge with a lot of optimism.

Dr Kawesha observed that the measure was aimed at offering people an opportunity to borrow money cheaply with the expectation that the funds would be used to expand businesses so that they could realise their industrialisation plans.

"ZACCI has received the news from the central bank as a measure aimed at offering people the opportunity to borrow money cheaply with the expectation that the funds will be used to expand our individual and collective capabilities to enterprise as well as realise our industrialisation plans," he said.

In response to a press query, Dr Kawesha said: "Traditionally and in a free market economy like ours, many of the private sector businesses would be up in arms screaming over Government's regulation.

He observed that established businesses and prospecting individual entrepreneurs have joined the authority overtime in demanding for reduction in the cost of capital from the financial institutions in their jurisdiction.

Dr Kawesha said fighting extreme poverty required concerted efforts from the public, Government and the private sector.

He said it was important for the Ministry of Finance, BoZ and the commercial banks and microfinance institutions to take a 360 degree approach in making capital for development and infrastructure projects as well as for Small and Medium Enterprises (SME) cheaper than at the current levels.

Recently, the Bank of Zambia (BoZ) introduced a cap on the effective annual lending interest rates that non-bank financial institutions licensed by the central bank can charge their customers.

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

The maximum effective annual lending interest rate for non-bank financial institutions designated as microfinance service providers by BoZ shall not exceed 42 per cent.

BoZ said the capping of interest rates was is aimed at making borrowing from non-bank financial institutions more affordable and equitable, especially to the vulnerable micro-borrowers served by this sector.