The drop in policy lending rates as well as the lowering of the statutory reserve ratio will open borrowing opportunities for small and medium enterprises (SME’s), including agricultural operations.
According to the Private Sector Development Association (PSDA), the downward adjustment will move SME’s from short-term borrowing to medium-term borrowing as banks expanded their capacity to fund economical ventures.
“Moving to medium-term borrowing improves the liquidity of SME’s, giving them a chance to be more productive,” said Yusuf Dodia, PSDA chairperson.
Last week BoZ reduced its rate to 12.5% from 14%. It also reduced the statutory reserve ratio to 12.5% from 15.5%.
A quick survey by africanfarming.com showed major banks, including Stanbic, Barclays Bank of Zambia (BBZ) and Standard Chartered Bank announced reductions in lending rates. It comes into effect this week.
Stanbic Chief Executive Charles Mudiwa said his bank reduced all monetary policy rate-linked loans by 1.5%.
“The reduction in interest rates will immediately pass on the benefit to customers and lower the cost of credit, thereby increasing economic activity in the productive sectors of the economy and lessening the burden on borrowers,” he said.
According to him, the bank will now be in a position to lend to more than 10 000 SME’s as result of improved liquidity.
BBZ managing director Mizinga Melu said her bank will also increase funding to SME’s. “The move will lead to increasing levels of liquidity which will stimulate a lot of economic activity and we will leverage this to increase funding of projects,” she said.
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