Features

Credit scheme launches ‘business coach’

ZCGS supports small-scale manufacturing such as metal fabrication and block making

BRIAN MALAMA, Lusaka
ZAMBIA Credit Guarantee Scheme (ZCGS) will this year introduce the ‘business coach’ to train and supervise small and medium-scale entrepreneurs (SMEs) to operate efficiently.
ZCGS is a start-up company created to promote growth and competitiveness of SMEs by providing a platform for financial institutions to offer affordable financial products and services at a reduced risk, with a view to growing the economy.
It is a limited company which is 100 per cent owned by Government under the Ministry of Finance.
The company has, through extensive research, been compelled to introduce the business coach model which is one of the best thought – out strategies employed around the world.
ZCGS chief executive officer Francis Musonda believes that the business coaches will be the game changers in helping the medium, small and micro entrepreneurs to remain afloat.
“We have the best model we are going to experiment with because this comes with monitoring, compliance and evaluation agreement. So, no more shortcuts and diverting loan money to buy luxuries,” Mr Musonda said.
The new approach is one way of banks warranting the safety of their investments through loans to small-scale entrepreneurs with or without collateral depending on their business plans.
The compliance, monitoring and evaluation agreement form signed by the two parties restricts the borrower from making unplanned expenditure without the approval of the business coach.
This approach is deemed necessary because past experiences have taught Government many lessons.
Government has in the past offered credit guarantees through the Bank of Zambia and the Development Bank of Zambia, but these attempts at alleviating poverty through such empowerment failed due to high levels of default.
The business coach will mentor the SMEs on risk management, record keeping and financial management.
“The business coach is mandated to look into the interests of the bank and so far ZCGS has shortlisted about five experienced institutions to provide these services,” Mr Musonda said.
Corporate governance
Government has created adequate policies and corporate governance structures by appointing a board of directors from the private sector.
The intention is to make the credit guarantee outfit a professionally accomplished success story.
Government has also pumped in US$5 million as a star-up seed capital and expects a highly motivated and professionally competent team to run this institution to the benefit of the country.
Government expects the private sector and the general public to lead this portfolio and grow its business.
It has no intentions of running the business but to dilute its shareholding capital from 100 per cent to a minority stake.
Mr Musonda notes that the company is mandated to grow its capital in order to bring on board a large base of SMEs and is currently building partnerships with commercial banks.
Operations
Once the credit guarantee scheme is launched in September this year the banks will expect the loan applications and business plans to be subjected to analyses and evaluations before any considerations.
“There will be cases, for example, when the loan applicants fail to provide adequate collateral or security, but bank may be motivated to pursue potential business proposals and having followed all procedures in their catalogue, it will then be at this point the credit scheme will come into play to consider to offer the partial support,” Mr Musonda explained.
ZCGS will not interface with the public but through commercial banks and it will only play the role of the partial guarantor once the clients meet all prerequisites and conditions.
“Acting on banks’ recommendations and loan applicants meeting the criteria the credit scheme will then move in to pay the 50 per cent partial guarantee to cover the lenders’ risk,” Mr Musonda explained.
ZCGS programmes in collaboration with the financial institutions will create an upswing of economic players among SME’s.
The credit scheme’s reduction of risk by 50 per cent from the monies borrowed from banks will automatically push down the interest rates and naturally spur vibrant economic activities.
ZCGS will largely focus on uplifting the agriculture sector and poultry, in particular, in empowering local people to drive their own economic fortunes and be able to compete with some foreigners.
“We want to stimulate poultry production in this country and for export. We have also come up with a product which is called Small-scale Manufacturing Block Making, which will finance such ventures,” Mr Musonda said.
He noted that the aggregate total of SME’s coming together will ultimately turn the wheels of commerce generating a combined economic activity that will translate into increased gross domestic product (GDP).
According to the Bank of Zambia statistics in December 2017, the total country loan portfolio stood at US$2.5 billion.
Eighty-five per cent is what the big companies consumed while 15 per cent is what the SMEs shared.
“As ZCGS we believe the SMEs are the biggest employers in this economy. When you have an economy where 85 per cent of loans are consumed by big companies it will never grow, but will be hovering over three to four per cent growth,” Mr Musonda observed.
He argued that once the trends change and 85 per cent of the loan portfolio is consumed by the SMEs the fortunes will certainly turn around.
Government desires that all those who have been excluded from the financial loan portfolios but with brilliant innovations such as metal fabricators and entrepreneurs be swallowed in the scheme to help alleviate poverty and create employment.
Project launch
ZCGS pilot programme will be launched in the first week of
September this year to run for the first six months in Lusaka before spreading countrywide.
The company’s portal will be online for all to access via mobile phones or any other computer-based application.
The portal will also host Zambia Revenue Authority for tax enforcement and compliance and the Patent and Companies Regulatory Agency (PACRA) for patents and registration.

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