Bank of Zambia, FSD Africa and FSD Zambia sign MoU for Second Phase of Credit Market Monitoring Programme
Lusaka, 20th March 2019: The Bank of Zambia has come together with its long-term partners, FSD Africa and FSD Zambia, to sign a Memorandum of Understanding for the implementation of the second phase of its Credit Market Monitoring Programme (CMMP). This is in recognition of the need for responsible credit market development and its overall contribution to Zambia’s economy.
The CMMP, the first phase of which commenced in 2014 with the support of FSD Africa, is an initiative that is improving access to quality data and analysis on Zambia’s credit markets. Under the initiative, regulated credit providers submit supplemental quarterly returns on their loan book data to the central bank which is published, in aggregate, on the Bank of Zambia website.
The CMMP provides Zambian authorities with information they need to make informed choices about how best to target support and enable credit markets to grow, as well as to manage risks and assess emerging market trends such as mobile credit. Within the Bank of Zambia, early CMMP data provided insights that contributed to the lifting of Zambia’s interest rate caps in 2015. CMMP data has since been integrated into the central bank’s credit supervision and policy processes and is being used in internal information sharing and decision-making.
For the private sector, CMMP data allows credit providers to benchmark their performance against industry as a whole which helps to spur market growth through greater innovation and competition. It also allows new investors to assess market trends and make decisions on how and where to invest.
The second phase of the CMMP will provide continued support to the expansion of the initiative
and its integration within the Bank of Zambia. Amongst other things this will include data collection and analysis on priority topics such as the cost of borrowing and credit for key user groups such as SMEs and women. It will also include support to industry and other interested parties on how to use the data for market monitoring and strategy development purposes.
The CMMP is the first of its kind in sub-Saharan Africa, with the Bank of Zambia pioneering a trail that we hope other central banks on the continent will seek to emulate through similar processes.
Dr Denny H. Kalyalya, The Bank of Zambia Governor, said: “The Credit Market Monitoring Programme provides the Bank of Zambia with insights into the factors that influence the cost of providing credit and the barriers to the flow of credit to priority sectors with a view to formulating evidence-based regulatory interventions for credit market development.”
Steve Beel, Head of Economic Growth, DFID Zambia, said: “Increasing the supply of finance to businesses that drive economic growth is critically important. Enhanced credit market monitoring in Zambia will actively increase credit availability to key economic sectors, enhance regulatory oversight and market information, lower the costs of credit, increase financial inclusion, and improve balanced economic growth. The UK is pleased to support FSD Africa, FSD Zambia, and the Bank of Zambia in this important area of work.”
Mark Napier, Director, FSD Africa commented: “Broad-based access to responsible credit is the engine of sustainable economic growth. Credit is an essential tool for any growing business, from tech entrepreneurship to housing to farming. It is also a necessity in enabling individuals to manage their daily challenges. We are proud to be partnering with the Bank of Zambia to build the information that will help drive credit to the sectors where it is needed most.”
Betty Wilkinson, Chief Executive Officer, FSD Zambia remarked: “Understanding credit flows helps everyone determine market options to both broaden and deepen credit services and access. We also see warning signs of problems in specific sectors and take action to help address any challenges. This programme is crucial for everyone to understand credit patterns and to use this knowledge to increase the links between financial markets and inclusive economic growth.”
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