The Development Bank of Zambia (DBZ) has recently signed a USD 30 million concessional loan with its peer China Development Bank (CDB), to fund borrowing from small and medium-size enterprises (SMEs) in Zambia.
DBZ Director General Jacob Lushinga explained that the concessional loan will be lent to SMEs in the agricultural, mining and manufacturing sectors which are within the five target sectors of DBZ Strategic Plan for the period 2013-2015.
The concessional loan is part of the Special Loan for the Development of African SMEs which is one out of eight new measures that the Chinese Government has undertook to strengthen ties with Africa.
It also lies under the framework of the Forum on China-Africa Cooperation (FOCAC) which has the CDB as the sole agency for implementing this measure, seeking to stabilize employment and develop the local market in Zambia and other African countries.
According to Xinhua, China’s official press agency, the concessional loan will be paid on a long-term basis with grace periods and at a rate of 5.5% per annum.
Up to fifty projects are expected to be benefited but the DBZ will further support SMEs to boost the local market and contribute to job creation, he added.
SMEs play an important role in Zambia’s economy and policies need to be review to encourage commercial banks to extend credit to them, explained Chinese Ambassador to Zambia Yang Youming.
In Zambia exists a lending gap to SMEs since local commercial banks manage an average aggregate exposure of 18% of loans to SMEs of the total lending, even though they represent 70% of the economy and 88% of employment.
The Development Bank of Zambia was established in 1972 as a joint venture between the Government, Public Sector Financial Institutions, the local private sector and foreign institutions to ease access to capital for private investment growth, productivity, wealth, and employment creation.