FRANCIS LUNGU, Lusaka
HIGH interest rates from conventional banks and micro- finance institutions in Zambia have for a long time been prohibitive to citizens’ aspirations to make personal investments.
As a result, public service workers and low income-earners are unable to obtain bank loans for economic investment.
The cost of borrowing on the financial market ranges between 24 and 47 percent in interest rates.
Consecutive governments have over the years instituted measures such as lowering the policy rate through the Bank of Zambia in a bid to influence the scaling down of bank interest rates.
Alas, this has not brought down the lending rates to affordable levels for public service workers and many other interest groups.
It is from this backdrop that the Patriotic Front (PF) government towards the end of 2011 birthed an idea which finally materialised in March 2013 by forming the Public Service Micro Finance Company.
The company is wholly owned by the Zambian government and is mandated to provide a wide range of affordable loans with interest rates as low as five percent and also offer other innovative financial solutions.
The company currently has one office in Lusaka which efficiently attends to public service workers countrywide.
Upon its operationalisation, the Public Service Micro Finance Company immediately disbursed K170 million from the total planned investment share capital of K500 million, according to the company’s chief executive officer Mubanga Mwiko.
Mr Mwiko said the company is aware that most public service workers face challenges in accessing finances from banks and micro- finance firms that normally charge high lending rates.
He said the countrywide service delivery is achieved through strategic partnerships with other government financial institutions like NATSAVE and Zanaco that already have a presence around the country.
ZSIC is another institution in partnership as it provides insurance packages.
“The minimum loan amount that can be accessed is K5,000 and the maximum amount is K50,000. The minimum repayment period is six months while the maximum repayment period is 60 months [five years],” Mr Mwiko said in an interview.
He said since inception, the company has disbursed a total of K162,520,600.00 in form of personal loans to 7,316 public service workers across the country, with 6,000 applicants pending as at the start of September 2018.
Going by the attractiveness of the loan packages, Mr Mwiko explained that a total of 40,000 applications were received in 2013 alone although most applicants were not eligible.
He said the approved and advanced personal loans that are 100 percent collateral free are payroll-based; disbursed through partner banks in line with the signed memorandum of understanding.
In addition to the loan products, Public Service Micro Finance Company director-business development, Paul Haambote said Government gave the company a duty free motor vehicle loan package to motive public service workers.
He said the brand new motor vehicle scheme cuts across personal, utility to agro-motor vehicles and that 550 units valued at K180 million had been released from October 2016 to date.
“We then engaged car dealers trading in brand new vehicles and we conducted road shows in provincial headquarters to create awareness among public service workers. People are free to even get tractors on loan under the agro-product package,” Mr Haambote said.
Ireen Malipenga is a public service worker at Kasempa Magistrate Court who has constructed a three bed-room house from a personal loan of K50,000. She obtained the loan from the Public Service Micro Finance Company at about 12 percent interest rate.
“I feel it was a blessing for me. I now have a house of my own with running water, electricity and [it is] well painted with a ceiling board. Even other workers are admiring what I have achieved from this loan,” she joyfully shares.
She has been servicing the loan at K943 per month. She has 60 months [five years] to repay her loan, meaning she will have to pay back a total of K56,580.
As for Humphrey Shambana, he teamed up with his wife in 2016 to get loans of K15,000 each which enabled them to invest in a piggery in Chongwe.
Both Mr and Mrs Shambana were eligible for personal loans as he is employed as an accountant under the Ministry of Finance while his wife is a secretary in the Ministry of General Education.
“The benefits are so great. We are [now] even supplying Chongwe area with pork. When I initially got my K15,000 loan, I put up a piggery structure. I also requested my wife to get a K15,000 loan and we combined efforts. The business has grown; we have employed a number of people at the farm,” he said.
In March this year, Government through the Public Service Micro Finance Company identified the need to further assist the public service community with a convenient way of saving and having quick access to the savings.
This led to the creation of the Public Service Savings and Credit Cooperative (PS-Sacco), a voluntary membership-based organisation that seeks to promote a culture of savings among public service workers.
PS-Sacco, which operates under the Public Service Micro Finance Company, is envisioned to create wealth for members with a mission to empower them towards affordable credit for life and through a culture of smart saving.
Membership requirements to PS-Sacco are a one-off fee of K200 and buying of a minimum of 1,500 shares at only K3 per share paid over a maximum period of 24 months. One also needs to make monthly savings of not less than K200.
PS-Sacco director-audit, risk and compliance, Sydney Siluonde said the co-operative is a revolving fund from which members could apply for soft loans according to their saving standing.
He said membership is open to all public service workers, employees of quasi-government institutions and state-owned enterprises.
PS-Sacco has several products on offer such as personal, education, development, emergency and veterans loans, according to Mr Siluonde.
He added that the veterans’ loan is a product designed for members who have retired from active employment but opt to remain active members.
“This package ensures that our senior citizens still maintain a dignified life. The loan has a maximum tenure of 24 months, with an interest rate of 12 percent per annum. This loan was tailored to prevent retirees from being destitute,” said Mr Siluonde.