Editor's Comment

ZICB adds value to banking sector

MARGARET Mwanakatwe.

THE launch of the Zambia Industrial Commercial Bank Limited (ZICB) is a welcome move and sends positive signals to and about the economy.
ZICB becomes the fourth commercial bank in which Government has some shareholding, among them Zanaco, Indo-Zambia, Investrust Bank [in which ZCCM Investment Holdings has controlling shares] and the National Savings Bank (Natsave).
Economist Chibamba Kanyama says the revival of the bank from privately owned Intermarket Banking Corporation has had its own controversies as to how Government would bail out a private bank.
“We have had other banks in the past go under without government intervention in the form of bailout. There have been questions asked about governance moral hazard in that imprudent banking practices will not be penalised. However, when assessed from a bigger picture, the intervention signals a fresh start on Government’s role in protecting depositors in the absence of a robust depositor insurance mechanism,” Mr Kanyama said.
Commercial banks exist to perform the function of commercial and personal lending by ensuring those whose funds they use are not abused.
For the depositor, it now means that the risk of losing a portion or all of your savings is seriously mitigated.
Additionally, it also implies Government has become a key player in the commercial banking industry that has previously been controlled by foreign investors.
Mr Kanyama says this in itself implies Government may have a bit of a rein in the market, particularly when cartels on interest rate manipulation emerge.
He says banking has a very important role to play in the development of a country, particularly towards advancement of investable funds to industry.
Economic expansion happens in an environment where there is perfect collaboration and partnership between commercial banks and the private sector.
“In the past many years, we have seen a ‘Tom and Jerry’ relationship between commercial banks and the private sector as the former regularly complained of discriminative and unproductive interest rate regime, with many foreclosures and liquidations,” Mr Kanyama said.
The latter, on the other hand, believed Zambian entrepreneurs had a poor borrowing culture and were a danger to the survival of the banking system.
As a result, the country saw the loan book tilted in favour of government securities and household (salary) backed loans.
“There is no way an economy can post healthy economic growth under such circumstances. I am hoping with the addition of a fifth bank where Government has some interest , there will be moderation and expansion of the loan book in support of the private sector, competitive interest rates, heightened levels of efficiency and a loan strategy focused on advancing indigenously run businesses,” Mr Kanyama said.
With the ZICB on board, Zambians should rise to the occasion of playing a significant role in our economy.
We expect a bank like ZICB to adopt a lending philosophy that looks at all sectors of the economy.
We also expect the bank to have a well-balanced mix between supporting trading activities and value addition projects.
We also believe the ZICB will add significant value in promoting transparent and effective corporate governance standards. They say once beaten, twice shy.
The ZICB, we believe, has learnt its lessons and we hope it can apply those lessons in entrenching good business practices.
“I have confidence in the Charles Sichangwa-led board of directors. In the past one year, Mr Sichangwa and I, under the Institute of Directors of Zambia, have trained hundreds of directors from both the public and private sector on corporate governance standards,” Mr Kanyama said.
The spotlight is therefore on Mr Sichangwa to ensure depositors’ money are well protected; taxpayers see growth and dividend contribution to Government and not a reverse of fortunes; prudent lending practices capturing all sectors of the economy; much more transparency and independence.

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