Monetary policy rate increase will stimulate lending – bankers

BoZ Building.

BANKERS Association of Zambia (BAZ) says the increase in monetary policy rate from 12.5 percent to 15.5 percent and the removal of caps on lending for commercial banks by the Bank of Zambia will increase “appetite” for financial institutions to lend out money to the public.
BAZ chief executive officer Leonard Mwanza said the subdued rates were undermining the banks’ capacity to lend but the removal of caps on lending rates and increase in the monetary policy will stimulate loaning activities.
“The appetite to lend especially to small and medium-scale enterprises (SMEs) was less but with this development, the banks will be able to price and structure interest rates correctly taking into account various costs,” he said in an interview last week.
Mr Mwanza said commercial banks incurred operational costs owing to the subdued interest rates.
He, however, said the cost of borrowing will become high because of the revised rates.
He, however, added that the rates will be in line with the prevailing economic fundamentals.
Mr Mwanza said the inflation rate has increased while the Kwacha has been depreciating in the past months but the interest rates remained low, thus impacting negatively on the commercial banks.
“We expect the banks to be responsible as they structure the rates but at the same time the rates should be structured according to the risk profile of each sector,” he said.

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