9 February 2013

Zambia: Banks Should Tap Into Outposts

ZAMBIA'S growing economy requires a sound and cost effective financial sector to provide affordable capital and also offer concomitant services particularly to the Small and Medium Enterprises (SMEs).

Thus the financial sector must work towards spreading their tentacles to the peri-urban and rural areas some of which have remained un-serviced for many years.

Some commercial banks have rightly tapped into the rural market where they have been offering services to farmers and other entrepreneurs.

One such institution is Indo-Zambia Bank (IZB) which in a space of two days has opened branches in Solwezi and Kasama.

Zanaco has also increased its footprint to 199 branches from 42 since privatisation, covering 74 districts in 10 provinces.

This is a response to the rapidly growing outposts and we hope that other commercial banks will expedite their expansion programmes.

Statistics show that 60 per cent of Zambia's population is not using banks because of various reasons.

Some of the reasons include limited outreach of banks and financial institutions to the general populace and the high spread between deposit and lending rates.

It is believed that some financial institutions have excessive collateral requirements and poorly managed cost structures which make borrowing difficult for SMEs and other sectors of the economy.

The latest FinScope study aimed at measuring access, usage, perception and demand patterns indicates that there is still need for more commercial banks to expand their services to rural areas.

Yes, there are also valid reasons why commercial banks are not moving to the rural areas.

Some outlaying areas do not have the required infrastructure that would attract financial institutions to tap into market in such areas.

The poor road network in some rural areas has been cited as an impediment towards growth of the financial sector.

The SMES sector has not grown sufficiently in the rural areas and thus the market may not be as attractive to the commercial banks.

Mainly, it is the small-scale farmers that are in need of financial services in the rural areas and even then, their enterprises are seasonal.

Three days ago, IZB opened its 18th branch in Solwezi while yesterday another branch of the same institution was born in Kasama.

IZB managing director, Shankardas Gupta has in fact pledged that his institution will continue on the path of growth and has targeted to open new branches in strategic areas around the country.

During the opening of the Kasama branch yesterday, Finance Minister Alexander Chikwanda pledged Government's support towards financial institution spreading out to rural areas.

Commercial banks therefore must take advantage of Government's goodwill to grow their enterprises in rural areas.

Zambia's economic outlay should not only be tilted towards the urban, but should be balanced so that development can be sustained in all parts of the country.

Commercial banks must close the gap and cut off exploitative institutions that have the tendency of giving out loans at unreasonably high interest rates.

Rural areas are yearning for development; banks must move there!

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