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‘SMEs shunning K10bn package’

By BUUMBA CHIMBULU and IRVIN MUYUMBWA
THERE has been slow uptake amongst Small and Medium Enterprises (SMEs) of the K10 billion stimulus package recently released by Government, Finance Minister Bwalya Ng’andu has said.
And Dr Ng’andu said Government had increased the number of Non-Financial Institutions that will lend money under the K10bn lending facility.
Commercial banks, according to Dr Ng’andu were expected to peg the interest rates for funds obtained from the facility around 16 to 17 percent.
Interest rates on the market are currently hovering between 28 and 30 percent.
He emphasised that the facility was for both existing and new businesses.
Dr Ng’andu however bemoaned the low uptake, saying this was because the information had not permeated to the SMEs since the fund was released while others still prefer getting such financing from non-financial institutions.
“What we have noted is that since the announcement was made, the uptake has been rather slow and what we are trying to do now is to increase the level of uptake. What is clear is that the Bank of Zambia has communicated directly with the various commercial banks and known non-banking institutions regarding this facility,” Dr Ng’andu said.
Dr Ng’andu said in an effort to increase uptake of the fund amongst SME’s, the ministry is in the process of bringing on board the non-bank financial institutions as well.
The reason is most of the SMEs usually borrow from non-bank financial institutions as opposed to directly from the commercial banks.
“Currently SMEs that wish to access the fund apply to commercial banks who in turn inform the central bank which releases the funds accessed at 12.5 per cent interest rate for a period of three years,” he said.
Dr Ng’andu also explained that he increase in the number of Non- Financial Institutions was meant to ensure that small businesses easily accessed the funds.
Dr Ng’andu said Government was aware that small businesses borrowed money from Non- Financial Institutions as opposed to commercial Banks.
“We are trying to address the needs for Small and Medium Enterprises (SMEs) that are likely to suffer the most from the downturn of the economy. Small businesses do not have reserves as opposed to businesses,” he said yesterday in Lusaka at a joint press briefing.
The Bank of Zambia has injected a K10bn medium-term lending facility into the economy through commercial banks to support businesses during the covid-19 period.
This is a three-year facility.
The minister encouraged new businesses to participate in the facility and access capital.
“Interest rates are usually determined by the policy rate which is currently at 11.50 percent, but we expected the lending rates to be around 16 to 17 percent, somewhere there,” he said.
Dr Ng’andu reminded businesses that this was not free money, stressing that “you borrow with expectation that you will pay back. So be careful with how you use the money once you access it.”
Meanwhile, Dr Ng’andu has appealed to airlines and the Zambia Airports Corporation Limited to liaise on how they can support each other during the challenge of business slowdown as a result of the coronavirus pandemic.
He said Government is having challenges to consider giving financial support to airlines because its revenue has also reduced.

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