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Formalising SMEs will reduce lending rates - AfDB

25 February 2011, The Post Online

The African Development Bank says formalising the small and medium enterprises will drastically reduce lending rates.

According to latest figures, the SME sector boasts 90 per cent of Zambia’s commerce.

In an interview, AfDB resident representative Dr Freddie Kwesiga said when SMEs, who operate informally, are formalised, the number of people seeking finance will increase which will result in cost sharing that will reduce the rate of lending.

He said with the AfDB general capital increase to US $100 billion for Africa for the next three years, his bank was working towards improving access to money for the private sector and had developed a programme that specifically targeted the SMEs.

“We would like to get the SMEs to formalise through registration and good corporate governance so that they can also contribute meaningfully to the national economy,” said Dr Kwesiga.

AfDB has partnered with the International Trade Center to train counselors and bank lending officers in financial management to provide the service to the SMEs who will benefit from the latter’s credit facility that is being implemented by Zanaco and Investrust banks.

Commenting of the exercise, Zambia Development Agency director for micro and small enterprise division Windu Matoka said the training will improve competitiveness of the SME sector and improve their access to finance.

He said 100 companies stand to benefit from the funding of the AfDB credit facility to the SMEs.

Matoka urged other international organisations to consider developing financial and non financial products in the country.

He said the AfDB project will target women owned or managed groups in tourism, agriculture and agro-processing, construction and micro finance.

“This is exciting to ZDA as the SME sector is a key pillar in facilitating development and it has come at the right time when the Micro, Small and Medium Enterprise Development Programme is being implemented,” said Matoka.

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