The Zambia Development Agency (ZDA) has recently advised the country to create an Export Import Bank (EXIM Bank) with the support of international development partners, which would help to improve lending to small and medium-sized enterprises (SMEs) and boost exports’ volume and diversification.
The announcement was done by ZDA’s Manager in Charge of Exports, Mr. Albert Halwampa, whom explained that an EXIM Bank would also help to protect exporters against losses from non-payer foreign importers as provide transport insurance as well.
Many countries with either developed or emerging economies count with an EXIM Bank that subsidizes export finance to support traders and raise its competitiveness in the international markets, however, in Zambia there is no such institution yet, explained Mr. Halwampa.
In Zambia, most of exporters are SMEs that are constrained with the need of credit to grow their businesses and attend international demand since they are not usually paid until the goods reach the intended destination, explained Public Sector Development Association (PSDA) President Yusuf Dodia.
With the country’s need of diversifying its exports to be less dependent from copper, the government must support SMEs through access to finance which currently is really low and at a high borrowing costs, added Mr. Halwampa.
According to a Bank of Zambia (BoZ) research, SMEs represent 70% of the country’s economy and 88% of employment.
However only 10% of them have access to credit from commercial banks and 49% of them see access to finance as an obstacle to raise operations according to the International Labor Organization (ILO).
This is the result of an average aggregate exposure of 18% of loans to SMEs managed by Zambian commercial banks according to African Development Bank (AfDB) findings.
It has generated a lending gap that is expected to be covered with the support of the Citizens Economic Empowerment Commission (CEEC) that expects to invest a total of ZMW 400 billion and support the development of 36,000 SMEs.
According to ZDA, the EXIM Bank would be established with the participation of private financial institutions to manage it and with funds from international donors either individual or corporate in form of equity.