The African Development Bank (AfDB) has released US$1.5m to boost Zambia’s Small to Medium Enterprises (SMEs). “The SME programme has already approved the first two of the 25 financial institutions that will benefit from the programme’s funding and technical assistance. Center for Financial Stability (CFS), a deposit-taking micro-financing institution, will receive US$1.5m credit to increase loans to Zambia’s SMEs,” said AfDB resident representative in Zambia, Freddie Kwesiga. SMEs represent 70% of the Zambian economy and are therefore the lifeblood of the country’s economic development. According to Zambia Development Agency, the current economic situation in the country presents opportunities which if taken advantage of can lead to the establishment of vibrant enterprises. Vast opportunities are available in what have been identified as growth sectors with economic activities such as, agricultural, mining and tourism. In one of the gatherings to assess the importance of SMEs, Dr Michael Gondwe, Governor of the Bank of Zambia said SMEs in Zambia provide sustainable economic growth through job creation, development of entrepreneurial skills and the potential to contribute significantly to export earnings. He said “However, provision of finance to the SME sector in Zambia still remains a challenge. A survey conducted by the World Bank on Enterprise Development in Zambia identified poor access to finance as a major impediment to investment and growth in Zambia. Only 16% of firms surveyed reported having a loan or line of credit from a financial institution, compared with 23% for the region and 35% for all countries surveyed. Therefore, while Zambia’s cost of doing business index has progressively improved in recent years, access to finance continues to feature among the three key constraints to investment and growth.” However, Commercial banks in Zambia are slowly realising the importance of the SME sector. At the end of December 2011, commercial banks’ lending to SMEs was at 21.0% of total loans, an improvement from 17.0% in December, 2010. This also represented an increase in lending to SMEs by 68.9% to K2, 322.5 billion from K1, 375.0 billion in 2010. Although this trend is impressive, much more needs to be done in order for the sector to meaningfully contribute to the growth of the country’s economy. Provision of finance to the SMEs can be a leading conduit for transforming the economy by opening up business opportunities as well as channelling resources more efficiently and effectively to the sectors that require it the most. The Zambia SMEs grant comes as AfDB has also released a total of US$1.3m grant to two Mozambican companies in agro-business in a move to boost the country’s agricultural sector. MSME News Network
Posted on: Wed, 24 Sep 2014 09:51:27 +0000
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