Mitigate default rate, banks told

COMMERCIAL banks should seriously consider attaching credit officers to mitigate default rate by companies that obtain loans, Minister of National Development Planning Lucky Mulusa has said.
Last week, Zambia Chamber of Commerce and Industry acting president Pinalo Chifwanakeni said access to affordable finance is still a challenge in Zambia due to various factors such as high interest rates, taxation costs and lack of quick movement of goods, among others.
Mr Mulusa, however, said recently that, the tightening of monetary policy being implemented by the Bank of Zambia to curb inflation and has reduced liquidity in the financial system has resulted in increased cost of savings as well as the cost of living.
“The measure has also led banks and other lending institutions to respond by increasing interest rates even by margins [such as 50 percent] that are not fully justifiable,” he said.
Mr Mulusa said Government will soon implement measures aimed at addressing rising interest rates and streamlining other policies as a way of responding to the economic challenges.
“The biggest problem is that there is low penetration of Zambians in activities that underpin real gross domestic product. Of course, interest rates are too high and we are doing something to bring them down but, also, there is a poor repayment culture in this country whereby some people prefer to buy the latest Mercedes Benz instead of growing the company.
“When you look at the rate of defaulting, it is worrisome to see banks grabbing properties and liquidating companies but also banks are not doing much – they shouldn’t wait for companies to default but should attach credit officers to work with the client and if something goes wrong, the loan can be restructured. This way, we will change the mindset of people,” he said.

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