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Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Joint MEFMI-FSI Regional Seminar or on consolidated supervision, Lusaka, 19 October 2009. | Caleb M Fundanga: Consolidated supervision Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Joint MEFMI-FSI Regional Seminar or on consolidated supervision, Lusaka, 19 October 2009. * * * The Executive Director of MEFMI, Dr. Elias Ngalande The FSI, Senior Financial Sector Specialist, Mr Amarendra Mohan The Director, Financial Sector Management Programme of MEFMI, Mr Alphious Ncube Distinguished Resource Persons, Participants, Ladies and Gentlemen It is my honour and privilege to officiate at this regional seminar on Consolidated Supervision jointly organised by the Financial Sector Management Programme of MEFMI and the Financial Stability Institute of the Bank for International Settlements. May I also take this opportunity to welcome and thank our distinguished resource persons, for accepting invitations to come for this important seminar. It is my hope and trust that their participation will enrich the deliberations of this seminar. Before I delve into the intricacies of the seminar, I would like to applaud MEFMI, and the FSI for consistently working together in the region to upgrade the banking supervisory skills. I am reliably informed that at least once every two years, the two organisations organise a high level seminar on a topical issue. It is therefore befitting for me to commend the two institutions for the work well done. Ladies and gentlemen, to some, it would not be a surprise to note that the seminar comes shortly after the first anniversary of the collapse of Lehman Brothers, one of the first banks to fail in a series of cascading defaults of major international banks, which precipitated the onset of the current global financial crisis and the resultant worldwide economic recession. The case of Lehman Brothers is just one of the many that highlights apparent weaknesses in the global regulatory and supervisory environment. To this end, market practitioners and academics are still analysing and discussing the causes, prudential supervision frameworks, problem bank resolutions and strategies to avoid future systemic challenges. As the current global financial crisis has demonstrated, critical deficiencies still remain in risk management systems. Areas in need of critical enhancements include identifying key risks both within and across borders; assessing these risks, including stress testing and macroprudential analysis to determine the impact on the financial system; monitoring, developing coordination protocols, reviewing the regulatory frameworks, adopting appropriate risk management frameworks and adopting international accounting standards. While these structural deficiencies are not new, the current crisis has brought them to the fore. The speed at which the crisis has spread across the globe indicates that the development of coherent and rigorous frameworks for maintaining financial stability came too late for several countries, leading to adhoc and inconsistent policy responses. Ladies and gentlemen, over the years, we have witnessed a process of change that has allowed many financial organisations worldwide to adopt more flexible structures whereby they have established a wide range of subsidiaries and affiliates that are engaged in business lines different from the core business of the parent financial institution. We have seen banking activities, asset management or insurance activities that previously were conducted on a stand-alone basis now being provided within one financial group. This trend has steadily gained momentum in the Eastern and Southern African financial sector. Some of these financial groups operate businesses across borders. The main economic and financial benefit which encourages the formation of such groups is the enhanced ability to achieve economies of scale and capture synergies across complementary financial services business lines. These synergies result in improved operational efficiency and effectiveness due to lower costs, reduced prices, and improved innovation in products and services. At the same time the emergence of such groups has brought complex linkages and relationships among economic agents. Consequently, they have also necessitated a paradigm shift in supervisory approaches in order to identify, manage and monitor risks. It is evident in our various jurisdictions that current legislation and regulatory tools are not adequate to effectively address the potential risks that threaten the safety and soundness of our respective financial sectors posed by activities emanating from such financial groups. Ladies and Gentlemen, I do not want to dwell much on what should be addressed by this seminar. I am glad that MEFMI and the FSI are conducting this seminar on Consolidated Supervision for the region at a time that our region is also exploring these topical issues. It is my hope that this seminar will equip participants with relevant skills as senior examiners to develop appropriate policies for their jurisdictions with respect to Consolidated Supervision as well as prepare them for the daunting challenge of actually implementing Consolidated Supervision in our various jurisdictions. It is also my expectation that you will leave this forum after three days, with a new mindset and a renewed commitment to practice what you will have learned so that you could contribute to improving supervisory frameworks in our various countries. I trust that the seminar will also provide you with an opportunity to network and establish durable and valuable professional contacts within the region. I wish to take this opportunity, on behalf of the MEFMI board and indeed on my own behalf, to thank the FSI for their continued support to MEFMI activities over the years. As our cooperating partners, they have always shown willingness to go an extra mile in providing the necessary expertise that helps to sharpen our skills and groom the MEFMI Fellows on gratis terms. I have looked at the programme planned over the next three days. It has a comprehensive list of topics, which I believe will enable you to broaden and deepen your knowledge and skills. I have also been reliably informed that you will get information from seasoned financial sector practitioners and supervisors who will provide you with valuable insights on the subject of Consolidated Supervision and associated risk management processes. Ladies and Gentlemen, allow me now to express my gratitude to the Federal Deposit Insurance Corporation (FDIC), Central Bank of Nigeria, Reserve Bank of South Africa, Reserve Bank of India, Standard Chartered Bank Zambia Plc and the Reserve Bank of Zimbabwe for releasing officials from their institutions to come and participate in this important seminar and share their experiences and expertise with us. Chairperson, may I also take advantage of my position on the podium to ask you all to join me in thanking them with a hand of applause. I wish to urge them to continue supporting MEFMI as the capacity needs of the region are yet to be fully met. To the participants, I urge you to fully participate in the discussions and use every opportunity to tap from the vast experience and expertise represented here. Sustainable capacity building in the region can only be achieved through sharing of ideas and experiences on both international and regional perspectives. Finally, I wish you all the best during your stay in Lusaka. I hope that you would make some time to visit some of the beautiful spots that our city and country has to offer. With these remarks, I now declare this workshop officially opened. I thank you. | bank of zambia | 2,009 | 10 |
Opening remarks by Mr Caleb M Fundanga, Governor of the Bank of Zambia, at the official opening of the Stanbic Bank Zambia Limited, Mulungushi branch, Lusaka, 24 November 2009. | Caleb M Fundanga: Developments in the Zambian banking sector Opening remarks by Mr Caleb M Fundanga, Governor of the Bank of Zambia, at the official opening of the Stanbic Bank Zambia Limited, Mulungushi branch, Lusaka, 24 November 2009. * * * • Members of the Board of Directors, Stanbic Bank Zambia Limited • Stanbic Bank Zambia, Managing Director, Mr. Joseph Chikolwa • Management and staff of Stanbic Bank Zambia • Distinguished Invited Guests • Members of the Press • Ladies and Gentlemen Allow me to begin by thanking the Stanbic Bank Zambia Limited Managing Director Mr Joseph Chikolwa for inviting me to this occasion which marks the official opening of the Stanbic Bank Zambia Limited Mulungushi Branch. As the regulatory authority for the banking sector, the Bank of Zambia is pleased to be associated with achievements of institutions that we regulate, particularly where these developments lead to increased access to banking services as well as convenience for the Zambian public. It is also encouraging to see banks expanding their services to areas outside the central business district in order to bring their products and services to their customers’ door step. This is no doubt a strategic move that confirms that there are enormous opportunities here, which the bank can benefit from despite the stiff competition. The vast number of bank branches around this part of the city also confirms the stiff competition in the banking sector and we hope that the public will be the ultimate winner though affordable products and services. Ladies and Gentlemen, it is a well known fact that bank branch expansion programs play an important role in increasing access to the unbanked. However, there is need to complement physical branch expansion with other product innovation programmes that will capture a lot more people in the remote areas of our country. The real challenge for all of us is how to enhance savings mobilisation, and effectively channel the public’s savings to its most productive use. I therefore encourage banks to offer an expanded range of innovative banking products in order to mobilise savings to support financing of economic activities in all parts of the country. Distinguished Guests, the banking sector in this country has, over the last few years, witnessed significant growth in consumer lending. As a matter of fact, on a sectoral basis the “personal loan” category has been the largest recipient of total credit and accounted for 24% of at end-October 2009. The resultant credit expansion has no doubt brought significant benefits to the economy. However, the secondary effects of the recent global economic crisis pose a real challenge to the banking sector through increased non-performing loans. For instance, non-performing loans were recorded at 7.2% as at December 2008 but has almost doubled as at September 2009 to 13.1%. In order to mitigate the high credit risk noted in the banking sector, it is important for banks to address the risk posed by information asymmetries through a credit information sharing mechanism. To this end, the Bank of Zambia through NB Circular 3/2008 of December, 2008 made it mandatory for banks and other financial service providers in Zambia to go through the Credit Reference Bureau before a loan is provided. Consequently any loans approved without passing through the Credit Reference Bureau will attract Regulatory Action. I must also mention here that in striving to increase credit, banks must always comply with the rules and regulations as stipulated in the Banking & Financial Services Act and other subsidiary regulations to ensure the safety of customers’ deposits. Furthermore, much more credit needs to be directed to sustainable productive sectors like Agriculture, Manufacturing and Tourism in order to drive the economy forward and not lending for consumption only. Ladies and Gentlemen, it is pleasing to note that despite the recent challenges facing the banking sector, Stanbic Bank Zambia Limited’s commitment to growth and re-investment is unwavering. The bank continues to be adequately capitalised with its total assets accounting for 12.1% of the banking sector’s total assets. Its deposit base remained strong at 12.9% of the total industry deposits while total loans accounted for 13.8% of the sector’s total loans as at end-October 2009. The bank has a network of 12 branches including this Mulungushi branch and about 47 automated teller machines. In fact, on 10 July, 2009, I was privileged to participate at the “Foundation Stone Laying” ceremony for the multi-billion Stanbic Bank Zambia Limited new Head Office building. I therefore, commend the bank for its relentless effort in trying to modernise its facilities and expand its network. Allow me to conclude by appealing to all banks and other financial institutions to explore ways of enhancing the efficiency in service delivery. By enhancing efficiency, banks will be capable of offering more affordable banking services. This has the potential of drawing a larger number of Zambians to the financial system resulting in an expanded banking clientele for the benefit of both the banks and the economy. This will go a long way in complementing the Government and the Bank of Zambia’s efforts in addressing the various weaknesses in the financial sector as well as to guide efforts for realising the vision of a stable, sound and market based financial system that would support the efficient mobilisation and allocation of resources necessary for economic diversification and sustainable growth. In the recent past, the Government has adopted prudent fiscal policies that enabled the private sector to access more credit from the financial system. In line with this, the yields on Government securities have drastically reduced with the 91 days Treasury bill rate dropping to 7.88% in the latest auction while inflation has also trended downwards to 12.3% in October. Some players have responded positively to these market movements by reducing their lending base rates. However, some are still dragging their feet and are yet to adjust their rates. While we commend the banks that have responded positively, we call upon those who have not done so to act in a positive and prompt manner in order to make credit more affordable to the majority of our people. This in turn will lead to the growth of the productive sector and in particular Agriculture and the SME sectors, which are the engine for economic growth of our country. Finally, let me extend my gratitude to the Board of Directors and the Managing Director of Stanbic Bank for inviting me to be with you on this auspicious occasion of the opening of this branch. It now gives me great pleasure and honour to declare Mulungushi Branch of Stanbic Bank Zambia Limited officially open and I thank you for your attention. | bank of zambia | 2,009 | 11 |
Remarks by Mr Caleb M Fundanga, Governor of the Bank of Zambia, at the Annual National Development Conference of the Zambia Institute for Policy Analysis and Research, Lusaka, 28 November 2009. | Caleb M Fundanga: The role of professionals in economic development Remarks by Mr Caleb M Fundanga, Governor of the Bank of Zambia, at the Annual National Development Conference of the Zambia Institute for Policy Analysis and Research, Lusaka, 28 November 2009. * * * Hon Minister of Finance and National Planning, Dr Situmbeko Musokotwane The Permanent Secretary Budget and Economic affairs, Mr Emmanuel Ngulube ZIPAR Executive Director – Mwilola Imakando Distinguished Guests, Members of the Press Ladies and gentlemen, It is indeed a pleasure for me to be invited to this very important gathering to give a Scope of the Conference. The central theme of my address today is the role that professionals are expected to play in economic development in general and in the provision of public goods and services in particular. You will agree with me that the levels of professionalism in our country has somewhat declined in the recent past. Nowadays, it is not rare to hear of corrupt practices and unethical conduct in the both the public and private sectors. This has no doubt compromised professionalism. Ladies and Gentlemen, as you are aware, professionalism entails possessing specialist knowledge and following a standard of conduct based on ethics that govern the use of this knowledge when providing a service to the public. Professionals provide essential and valuable services to any society. It is for this reason that the public depend on them more and more as economies advance. Therefore, professional status is an implied social contract to provide a service over and above normal duties. In this regard, a professional is viewed as one who carries additional moral responsibility and is honest, objective, impartial and with high integrity. Mr Chairman, the importance of a professional civil service in Zambia cannot be overemphasised. If we are to succeed economically as well as socially, we need to demonstrate appropriate levels of professionalism. A professional is open to views of others and are objective and their decisions are made in the best interest of the country. As professional in Zambia we need to evaluate our performance and aim to constantly improve. We need to see ourselves as part of the solution rather than the problem. Further, it is important to realise that civil service is a key component of Government as it supports the formulation and implementation of government policies and service delivery to the public. A professional civil service also ensures that government objectives and goals are achieved in an effective and efficient manner thus assuring confidence to the public. In order to carry out their duties, professionals need to be guided by a code of conduct which stipulates the core values and responsibilities of the profession. The code of conduct is usually developed by the profession to guide and to prevent exploitative behaviour and to preserve the integrity of the profession. The code sets a framework for meeting standards and provides disciplinary guidelines for unprofessional behaviour. However, it must be understood that codes of conduct are not only meant to serve as a disciplinary guidebook but also outline ideal ethical standards. In order to be effective, Codes of Conduct should be understood and used by all professionals in their day to day activities. It is therefore pertinent for the civil service to develop appropriate codes of conduct that meet the expectations of the public. It is the duty of Government to ensure that the civil service is aware of this code of conduct and its values. In advanced countries such as Japan, Italy and Singapore the importance of the code of conduct is strongly upheld at all levels of the public service. This has contributed to a strong, independent and impartial civil service, whatever their political persuasions, that is able to serve different governments in line with the requirements of the code of conduct. In order to enhance professionalism in both public and private sectors, it is key that professions demonstrate high ethical standards and values. I therefore urge all of us professionals gathered here today to take ethics seriously in order to enhance efficient delivery of services to our people. A robust and strong level of ethics can be achieved by providing ethics training and sensitisation as a component of continuous professional development. Although qualified professionals may be competent in their fields, it is vital to test their ethical knowledge. Equally there is need to promote Integrity at all levels of civil service. Ladies and Gentlemen, our country needs professionals with high levels of social and moral awareness so that all of us are aware of the moral obligations and potential impact of our thinking, decisions and actions. We need to be good role models for others in behaviour, attitude and relationships. Let us endeavour to act in a way that is professional and that retains the confidence of the public at all times. I thank you for your attention. | bank of zambia | 2,009 | 12 |
Remarks by Mr Caleb M Fundanga, Governor of the Bank of Zambia, at the 4th Eastern and Southern African Management Institute (ESAMI) Summer School Event, Arusha, 29-30 November 2009. | Caleb M Fundanga: The global economic crisis – Zambia’s strategy to maintain stability Remarks by Mr Caleb M Fundanga, Governor of the Bank of Zambia, at the 4th Eastern and Southern African Management Institute (ESAMI) Summer School Event, Arusha, 29–30 November 2009. * I. * * Introduction It is a great honour and privilege to be invited by ESAMI to discuss Zambia’s experiences in the global economic crisis and the strategies that have been chosen to deal with its effects and to bring economic recovery. In discussing this topic, I will begin by highlighting the effects of the crisis on the Zambian economy. I will also highlight the strategies used to maintain stability, indicate the current state of the economy, the challenges and then conclude. II. Origins of the crisis As you may already be aware, the beginning of the global economic crisis has been traced to the collapse of the sub-prime mortgage market which started between 2002 and 2006. This was when lending to the household sector in the United States of America (USA) was growing at a rate far beyond that of the broader economy (i.e. growth in GDP). The rising delinquencies in the subprime mortgage market triggered turbulences in the subprime mortgage-backed securities market leading to a financial crisis in October 2008, first, in the USA, and which later quickly spread to financial institutions in Europe. Subsequently, the financial crisis created a recessionary economic environment in which global trade, stock market indices, and commodity prices, such as copper and cobalt, declined significantly. The global financial and economic crises thus negatively impacted on economies around the world through falling export demand and tourist receipts, declining commodity prices, reductions in the availability of credit and trade finance, and less inflow of remittances, foreign portfolio, direct investment and other capital flows. In response to this crisis, several actions were taken at global level by the major economies to address the root causes and the effects of the global financial and economic crises. These were fiscal and monetary policy stimulus measures aimed at boosting global consumption and investment demand in an effort to avoid a much sharper global contraction than that which has already occurred. Measures typically ranged from reduction of interest rates, tax cuts and increased Government spending in form of bail-outs of strategic institutions and in some cases virtual nationalisation. Concrete steps were also taken to reform the regulatory and supervisory frameworks governing the financial sector. Further, increased resources were provided to key multi-lateral institutions such as the IMF and the World Bank. These institutions were also given the mandate to play a central role in leading the global response to the crisis and evaluating the efficacy of the various measures that had been implemented. III. Impact of the global economic crisis on Zambia The Zambian financial sector did not immediately or directly become adversely affected by the credit crunch as was reflected in the continued stability of the banking sector, with most banks being adequately capitalised and the inter-bank market operating normally. This was mainly due to the sector’s limited integration into the international financial markets. Further, our financial sector had no exposure to toxic assets, which led to the credit crunch in most developed markets. However, the ensuing global financial crisis, with the global economic recession that followed, adversely affected Zambia, like most global economies, mainly through: reduced revenue earnings from mineral resources; job losses, particularly in the extractive industry; lower foreign capital inflow (both foreign portfolio investment (FPI) and foreign direct investment (FDI)); loss of foreign exchange reserves; rising domestic inflation driven by pass-through effects of the depreciation in the exchange rate of the Kwacha against major currencies; and declining number of foreign tourists. Reduced revenue earnings from mineral resources As you may already know, Zambia, like many African countries, relies heavily on commodity exports. This made the country more vulnerable to the global downturn. The global financial crisis and the plummeting commodity prices on the international market negatively affected Government revenue. The global economic recession resulted in a reduction in world demand for copper, which in turn, led to the precipitous fall in copper prices. Copper prices at the London Metal Exchange (LME) fell from highs of US$8,980 per tonne in July 2008 to as low as US $2,812 per tonne in December 2008. The dramatic decline in the price of copper led to reduced earnings from copper exports by mining companies and subsequently reduced earnings for the Government from mineral royalties and corporate taxes from this source as well as falling income taxes from employees in the mining and related sectors. The reduced export earnings for the mining sector also translated into lower investments and production. Further, some mining companies, which were carrying out exploration works, discontinued these activities. Ultimately, all this led to job losses in the country’s extractive industry, leading to lower income tax revenue. In addition, the downturn caused a reduction in the Government’s capacity to develop the much needed infrastructure as it had to scaledown its capital expenditure in line with lower revenue. Loss of employment In the real sector of the economy, the impact of the crisis was reflected in the scaling down of production or the closing down of some mining operations due to low copper prices. This had the inevitable consequence of loss of jobs. However, the reopening of some closed mines which has followed the recovery in metal prices has since led to a slight improvement in the situation. External position weakened The declining earnings from copper exports adversely affected Zambia’s balance of payments position. For instance, during the fourth quarter of 2008, the overall balance of payments deficit widened to US $177.6 million from US $120.6 million recorded the previous quarter. Merchandise export earnings declined to US $910.0 million from US $1,206.7 million realised in the third quarter of 2008 following a sharp reduction in metal export earnings. Metal export earnings declined by 23.1% to US $712.0 million in the fourth quarter of 2008 from US $925.6 million the previous quarter. Metal export earnings at US $543.5 million in the first quarter of 2009 were 52.6% lower than the US $1,147.2 million recorded in the similar period last year. A slide in both copper and cobalt export earnings owing to lower prices accounted for this outturn. Nonetheless, it should be noted that commodity prices on the international markets have since recovered considerably and have thus started to bring improvement in Zambia’s external position. Foreign capital inflow reduced Ladies and Gentlemen, the global financial crisis led to a decline in the foreign portfolio investment inflows as investors generally reduced their exposure to financial instruments from emerging markets. The risk aversion towards emerging markets thus led to a reduction in foreign portfolio inflows and holdings in Zambia’s Government securities. This resulted in a net outflow of foreign portfolio investment since funds that matured were not rolled over and new funds coming in were being scaled down. For example, the foreign investor’s total holding of Government securities reduced from K1,054.7 billion in the third quarter of 2008 to K446.2 billion by the second quarter of 2009. Similarly, the flow of foreign investments at the Lusaka Stock Exchange switched from a net inflow of US$2.5 million during the period January to May 2008 to a net outflow of US$8.5 million in the similar period this year. Exchange rate volatility and domestic inflation The global financial meltdown caused a contagion effect to our foreign exchange market and led to volatility in the exchange rate of the Kwacha against major currencies. This unfavourable development was partly a consequence of reduced earnings from copper exports arising from the fall in copper prices as reflected in the lower supply of foreign exchange on the market by mining companies. For instance, the supply of foreign exchange to the market by mining companies declined by 35.7% to a monthly average of US $62.4 million in the first half of this year from an average of US $97.0 million in the last half of 2008. In addition, the weakness of the local currency was a consequence of increased risk aversion to emerging and developing economy financial assets, as stated earlier, attributed to the deepening global financial crisis. In this regard, the supply of foreign exchange by foreign portfolio investors for the purchases of Kwacha financial assets, such as Government securities and domestic company equities, declined significantly, with most non-residents preferring to liquidate their investments and externalising the foreign exchange. The result of this is the volatility in the exchange rate of the Kwacha against major foreign currencies. In the last quarter of 2008, the Kwacha depreciated by 26.9% to trade at an average of K4,394.76/US $ (BoZ mid-rate) from an average of K3,462.00/US $ in the third quarter. It should also be noted that the depreciation of the Kwacha against major currencies partly contributed to higher inflation, particularly as Zambia remains dependent on imports for a wide variety of consumer goods as well as inputs for domestic production. Further, this unfavourable development had a strong role in shaping inflation expectations. In Q4, 2008 BoZ made net sales of foreign exchange to the market of US $127.6 million, whilst in Q1, 2009 BoZ made net sales of US $208.5 million, in a continued effort to minimize exchange rate volatility. This meant utilizing international reserves to calm the foreign exchange market. Tourism sector contracted Apart from mining and related companies that were affected by the effects of the global recession, tourism was also negatively impacted. The number of foreign tourists visiting Zambia declined owing to financial problems and the credit crunch in their countries of origin. Availability of credit Perhaps the most challenging effect of the global financial crisis, especially for developing countries like Zambia, was its impact on private sector investment. Between 2006 and 2008 credit to the private sector grew strongly (at an average of 45.6% per annum), largely driven by the expansion of consumer credit and the strong growth in the domestic economy. An immediate consequence of the financial and economic crisis was limitation of credit lines and a slow-down in FDI flows. In 2009, domestic credit is expected to slow down as financial institutions adopt more conservative lending practices and tighten their lending standards. In addition, the deterioration in corporate and household balance sheets has now been translated into higher non-performing loans (NPLs) as a percentage of total assets in the banking sector (from 6% in mid-2008 to 13.1% in September 2009). The deterioration in NPLs entails more vigilance for the bank supervision function of the Bank of Zambia. IV. Strategies to maintain stability In responding to the crisis, the Government has taken steps to maintain macroeconomic stability and continue encouraging investments that will lead to diversification of the economy and safeguard vital social services. Further, the Government found new investors to take over the running of the closed mining operations and negotiated with the owners of the bigger mines on modalities of continuing with operations at the mines to forestall further job losses. The 2009 Budget prioritised infrastructure development with the view to opening investment opportunities for diversification, particularly in agriculture, tourism, and manufacturing sectors. Some specific measures include the following: (i) Agricultural sector: – Increased allocation of funds to the sector for livestock development and creation of at least one disease-free livestock zone, Farm Block infrastructural development and irrigation projects. Further, the value added tax on selected agricultural equipment and spares, was zero rated as incentive to increase agricultural production and productivity. (ii) Tourism sector: – In order to diversify the economy and attain broad based economic growth, Government increased the allocation to the sector to improve access to the Northern Tourism Circuit (infrastructural development in Mbala and Kasaba Bay). Further, Government will embark on the development of a new world class tourism area in Livingstone, and step-up the development of road infrastructure in key national parks namely, Luangwa and Kafue. (iii) Manufacturing: – In order to expand the manufacturing base, Government is promoting the establishment of Multi-Facility Economic Zones (MFEZ) on the Copperbelt (Chambishi), and Lusaka (Lusaka south and east) provinces by providing for fiscal incentives and quality infrastructure development in the budget. Operations at the Chambishi MFEZ have already commenced. Further, the budget reclassified and re-categorised certain manufacturing materials with the aim of lowering customs duty rates. (iv) Mining sector: – In light of the adverse impact of the global economic crisis on the mining sector and with the view of easing these effects, the Zambian Government introduced tax concessions, which included removal of the windfall tax, increasing capital allowance to 100 percent as an investment incentive, and reduction of customs duty on Heavy Fuel Oils. As the Central Bank, we have continued to monitor and review developments in the foreign exchange market and provide prudent support when necessary in order to dampen excessive volatility in the exchange rate and safeguard the recently achieved macroeconomic stability. To this end, the Bank has been a net seller of foreign exchange to banks. However, the Bank’s interventions were limited, given the global extent and magnitude of the crisis. Some of the specific measures the Bank of Zambia implemented include the following: • Improving information flows: The Bank of Zambia has enhanced its vigilance and interaction with the domestic financial system to ensure adherence to its supervisory guidelines and to enhance information flows. The BOZ is continuously interacting with banks to ensure that detailed information regarding foreign exchange transactions is provided and has also engaged major business entities to understand their expected foreign exchange requirements. This is necessary to ensure market constraints are addressed expeditiously. • Sale of foreign exchange: Increased the supply of foreign exchange to the market with the primary purpose of smoothening short-term volatility in the exchange rate and the foreign exchange market generally. Since September 2008 to date, the Bank has sold US $364.5 million to the market against purchases of US $9.5 million; • Issuance of directives: On March 2, 2009, the Bank of Zambia issued directives to commercial banks prohibiting the extension of loans and/or credits and providing other sources of Kwacha funding to non-residents for any maturity period of less than one year. The Government is in the process of issuing a statutory instrument, which will clarify this position, in order to protect the integrity of the financial market. • Collaboration with regulators: Engaged other regulatory authorities regarding measures to stem the growing trend of dollarisation, including some consideration to legislate and provide stringent regulations against this practice, which erodes the effectiveness of domestic monetary policy. In this regard, the Government is in the process of issuing a Statutory Instrument to ban quoting, invoicing and settling in foreign currency of domestic transactions for goods and services in Zambia. In addition, the Bank has enhanced its vigilance and interaction with the domestic financial system to ensure adherence to its supervisory guidelines and to enhance information flows between banks and the Central Bank. Accordingly, the Bank also introduced measures to ensure that financial market players under its supervision provide detailed information on their foreign exchange transactions. Further, the Bank has continued to reinforce the regulation and supervision of the financial sector. Effective surveillance of the financial market has entailed adoption of appropriate risk management policies and procedures meant to ensure that financial institutions do not undertake excessive risks that may increase the vulnerability of the country to external shocks. V. Current state of the economy Mainly due to the policies pursued the Zambian Authorities, the economy has shown appreciable resilience in the wake of the global economic crisis. Positive economic recovery trends have already started to be witnessed within 2009. (i) According to the Central Statistical Office, GDP growth is now forecast at 6.3% for 2009, up from 5.7% recorded on 2008, primarily driven by increased output in the mining, construction and agriculture sectors: • Mining growing by 21.4% • Construction by 15.5% • Agriculture by 7.1% (ii) Although inflation rose to 16.6% at end-December 2008 from 8.9% in 2007, much of this increase was driven by the rise in food and energy prices. By October 2009, annual inflation had fallen to 12.3%. (iii) The exchange rate has also stabilised with the weighted inter-bank rate moving within a range of K4,600 and K4,750 per US dollar in the third quarter of 2009. (iv) The external sector adjusted strongly with the strong rebound in copper prices, to above US $6,400 per metric tonne, and increased output (primarily through a new mine, Lumwana Copper Mine). The merchandise trade balance recorded a surplus of US $415.0 million (f.o.b.) in the third quarter 2009 compared to a deficit of US $183.9 million in 2008. Similarly, owing to favourable performance of the external sector, international reserves have increased to US $1,788.9 million in 2009 (end-Sept) from US $247.7 million in December 2003. (v) Equity markets have begun to reverse their large losses and FDI and portfolio flows are returning to Zambia’s financial sector. (vi) Zambia’s financial sector remains strong and stable largely due to banks being adequately capitalised, as confirmed by a recent Financial Sector Assessment Programme (FSAP) Survey by the IMF and World Bank. VI. Challenges The unfavourable effects arising from the recent global financial and economic crises are huge but surmountable. To this end, we need to do more than what we have done in the past. One of the key challenges relates to need to maintain macroeconomic stability. Macroeconomic managers in less developed countries have to be careful not to use the global economic crisis as a reason to slip back to unsustainable macroeconomic policies of the past. In addition, the crisis has brought to the fore, once again, the ever important challenge of accelerating the diversification process. Our reliance on export of primary commodities, copper in the case of Zambia, exposes our countries to external risks such as the ones we are currently experiencing. VII. Conclusion The Bank of Zambia and the Government will continue with efforts to deal with challenges from the global economic and financial crisis, which still remain significant and continue to threaten macroeconomic stability and the long term growth path of the economy. In this regard, focus will be on attainment of the following objectives: • Maintaining macroeconomic stability; • Maintaining fiscal prudence to ensure that it does not become the source of instability; • Increasing or consolidating public and private sector investment in infrastructure that builds the long term productive capacity of the economy and helps to diversify the economic base; • Improving the business climate by lowering the cost of doing business; and • Harnessing regional markets as an alternative source of demand for exports as well as source of supply for goods and services, including energy. | bank of zambia | 2,009 | 12 |
Remarks by Dr Tukiya Kankasa-Mabula, Deputy Governor Administration of the Bank of Zambia, at the Ecobank Launch of Financial Products, Lusaka, 16 December 2009. | Tukiya Kankasa-Mabula: Modernising Zambia’s payment system Remarks by Dr Tukiya Kankasa-Mabula, Deputy Governor Administration of the Bank of Zambia, at the Ecobank Launch of Financial Products, Lusaka, 16 December 2009. * * * • Members of the Ecobank Zambia Limited Board of Directors present; • The Managing Director of Ecobank Zambia Limited, Mrs Charity Lumpa; • Members of the Diplomatic Corps; • Ecobank Zambia Limited Customers; • Management and Staff of Ecobank Zambia Limited; • Members of the Press; • Distinguished Invited Guests; • Ladies and Gentlemen. It is with great joy and gratitude that I stand to address you at this important launch of the “Ecobank Rapid Transfer” and the “Non-Resident African Account”. I am informed that the two products are designed to transfer money faster and in real time while meeting the needs of customers resident in countries other than those where their accounts are domiciled. I am also pleased that these two products are aimed at promoting the efficient transmission of remittances at an affordable cost. Distinguished Ladies and Gentlemen, allow me to briefly highlight the importance of remittances to our economy. Remittances are increasingly growing to be one of the most important sources of finance in Zambia. Such funds are not simply an expression of fondness by people in the diaspora to assist their families in adverse situations. They also represent an important source of finance that augments capital inflows and investments in the economy. Formal remittance inflows into the country for the three quarters to September 2009 were estimated at K221 billion. This emphasizes the growing significance of globalisation and thus the need to intensify efforts to improve and establish, an environment that could enhance the impact of remittances and their effectiveness on the economy. Furthermore, remittances when compared to other forms of capital inflows, can have a positive impact not only on the volume but also on the quality of investments. People in the diaspora or their relatives are more familiar with the local economic and social environment and therefore can make a better use of the capital brought into the country. Infact, the recent few years has seen a growing number of Zambians who were in diaspora, returning and trying to set up their own small or medium size businesses, bringing in, not just funds, but also a lot of know-how. The downside to remittances is the possibility of the recipients remaining dependant on money transfers. In Zambia remittances are mainly used to secure daily family needs and to improve life style, as well as to construct or reconstruct houses, and to finance family ceremonies like weddings and funerals. Only a small portion goes into banks as savings. However in order to alleviate poverty, it is important that remittances are utilized in an effective manner that will contribute to economic development. It is therefore imperative that some of these funds are channeled into the financial sector and invested in meaningful projects like real estates, manufacturing and agricultural sectors. To achieve this, it is key that commercial banks are involved in the transmission of such funds. In addition, money transfer companies like Western Union and Money Gram have played a significant role in transferring remittances. Their wide geographical extension throughout the country covering many rural areas has complemented adequately the rather slow expansion of the banking sector in facilitating money transfers. The recent development of the payment system in Zambia has also played a key role in the movement of funds through official means. Nevertheless, unofficial flows still remain high signifying a business opportunity for banks. However, banks and other financial institutions, despite being safer, are perceived to be more expensive than the alternative unofficial means to the point of inducing many people in diaspora to stick to unofficial means. It is therefore important for banks to be mindful of their cost structures for such services. In this regard, the Bank of Zambia welcomes the introduction of the “Ecobank Rapid Transfer” and the “Non-Resident African Account which we have been informed will be lower cost products. This will no doubt increase the level of access to financial services in the country as well as enhance the level of competition by increasing the number of participants in the market. We hope that the introduction of these lower cost products will push the transfer commissions in this market downwards. On its part, the Bank of Zambia, working with several stakeholders, including Bankers Association of Zambia, has over the years made progress in modernising the payment system. The information technology which serves as a major platform for modern payment systems to operate has also advanced. These developments have set the stage for the development of innovative payment systems capable of serving consumers in a cost effective way. Further, the growth of the number of players as well as the increasing number of initiatives require a robust supporting legal infrastructure to govern the payment system. To this end, the National Payment Systems Act No.1 (NPSA) was enacted in 2007. The NPSA empowered the Bank of Zambia to develop and implement the national payment systems policy so as to promote the efficiency, stability and safety of the Zambian financial system. The Bank of Zambia thus designates players wishing to provide payment services such as money transfer services, mobile banking and other payment services. This process has strengthened the capacity of the BoZ to monitor transactions and to ensure that only safe and efficient institutions are allowed to provide payment services. Distinguished Guests, allow me to conclude by congratulating Ecobank Zambia Limited for the innovative products that we are launching today. We hope that our people can send and receive money conveniently, safely, and at a reasonable cost. I also wish to call upon all banks and financial institutions to emulate Ecobank by introducing such products which contribute to increasing access to banking services for the Zambian people. The opportunity, primarily for banks and other financial institutions, is to find ways to leverage Zambians in the diaspora to use remittance services that will both be profitable for the banks and will also provide them and their families with greater financial access. I thank you for your attention. | bank of zambia | 2,010 | 1 |
Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the VentureComp launch by Intermarket Banking Corporation, Lusaka, 12 January 2010. | Caleb M Fundanga: Fostering entrepreneurship amongst young people in Zambia Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the VentureComp launch by Intermarket Banking Corporation, Lusaka, 12 January 2010. * * * The Managing Director Intermarket Banking Corporation, Mr Subhrendu Chatterji Mr Joseph Toubi, Executive Vice President, Business Development & International Relationship, Afriland First Group Representatives from the Securities and Exchange Commission Representatives from the Pension and Insurance Authority Representatives from Lusaka Stock Exchange Representatives from Commercial Banks and other Financial Institutions Distinguished Invited Guests Members of the Press Ladies and Gentlemen. I am honoured for the invitation to officiate at this important launch of the business plan competition – VentureComp 2010. Allow me to begin by commending Intermarket Banking Corporation for its commitment to providing innovative products and services on the market. I have noted that the bank has brought an array of products and services that specifically target the small and medium scale enterprises and in some cases business start-ups. This is commendable and should be emulated by other banks. I am reliably informed that VentureComp 2010 is a business plan competition for students in all Universities, Colleges and other Institutions of higher learning. The spirit of the competition is to foster entrepreneurship amongst our young people and highlight the numerous opportunities available in the area of business. It is also interesting to note that the best business plan will be rewarded with start-up capital for immediate realization of the idea behind it. Distinguished Ladies and Gentlemen, the contribution of financial services to individual entrepreneurs as well as small and medium sized businesses cannot be over-emphasised. As you are no doubt aware, following the liberalization of the financial sector in the early 1990’s, the financial sector in Zambia has evolved rapidly spurred by increasing competition. Similarly, policies and the legal and regulatory frameworks have been developed to take into account the fast changing liberalised environment. These developments have resulted in a considerable increase in the number of banks and other financial service providers. Therefore, the banking sector has over the last few years, witnessed significant growth in consumer lending. As a matter of fact, on a sectoral basis the “personal loan” category has been the largest recipient of total credit in the recent years and accounted for 22% in November 2009. Small and Medium Enterprises have also significantly benefited from credit expansion. The resultant credit expansion has no doubt brought significant benefits to the economy as resources are increasingly channeled through to the lower end of the market. However, most of the credit extended by banks and microfinance institutions is targeted at individuals in formal employment or already established enterprises. Only an insignificant amount is extended to start-up initiatives or the informal sector. This has been exacerbated by the inability of entrepreneurs to articulate and sell bankable projects through robust business plans. In addition, it is common knowledge that Zambians prefer to be in formal employment rather than engage in entrepreneurial activities on a full time basis. The small number of educated Zambians engaging in entrepreneurial activities limits the scale of indigenous businesses as evidenced by the non participation of Zambians in major sectors of the economy like mining or manufacturing. It is however, important to realise that individual entrepreneurs as well as small and medium sized enterprises form the engine of economic and social development as they generate the much needed employment for our people. Hence the need to encourage all efforts aimed at stimulating entrepreneurship. Distinguished Invited Guests, our institutions of higher learning play an important role by molding and developing innovative and creative mindsets amongst our young people. With this belief in themselves, young people can be productive, take responsibility in their respective communities and ultimately drive our economy forward. We need to remind ourselves that Google was founded by students; Facebook was founded by a student; and even Microsoft was formed by Bill Gates as a student. Ladies and Gentlemen, let me assure you that the Bank of Zambia is committed to ensuring the availability of finance to viable entrepreneurs including small and medium sized businesses. To this end, the Bank continues to spearhead the Financial Sector Development Plan, which is aimed at strengthening the Zambian financial sector as well as guiding efforts for realising the vision of a stable, sound and market based financial system that would support the efficient mobilisation and allocation of resources necessary for economic diversification and sustainable growth. In concluding, I wish all entrants to this competition, the best of luck. I further with to congratulate in advance the ultimate winners of this inaugural business plan competition – VentureComp 2010. I thank you. | bank of zambia | 2,010 | 1 |
Remarks by Mr Caleb M Fundanga, Governor of the Bank of Zambia, at the official opening of Venture Capital Workshop, Lusaka, 26 January 2010. | Caleb M Fundanga: Exploring and creating financial opportunities in Zambia Remarks by Mr Caleb M Fundanga, Governor of the Bank of Zambia, at the official opening of Venture Capital Workshop, Lusaka, 26 January 2010. * * * The Managing Director, Slyvettan Investment Limited, Mr Robert Masiye Distinguished Resource Persons, Dr Peter Njang and Mr Kenny Rice Distinguished Participants Members of the Press Ladies and Gentlemen I am greatly honoured to officiate at this important workshop which is aimed at exploring and creating financial opportunities in Zambia. I wish to extend a warm welcome to all participants and resource persons, particularly those who have travelled from outside the country. Mr Chairman, I would like to commend Slyvettan Investment Limited for organising this important workshop. This workshop which is aimed at increasing access to capital by local entrepreneurs through venture capital is indeed more than timely as the country strives towards financial deepening, wealth creation and reducing the levels of unemployment. In order to achieve this, affordable financial services should be available to the majority of businesses. It is also gratifying to note that, potential investors will present their projects for possible funding at this workshop. Let me begin by giving a brief perspective of the enormous investment potential this country possesses. Zambia is a country with abundant natural resources and human capital. It is a centrally located country with eight neighboring countries and close proximity to the large market of South Africa. It also boasts of a suitable climate and peace. The country possesses all the necessary attributes for sustainable economic growth and development. Competitive production costs, incentives, and reforms have also enhanced the attractive investment climate for both local and foreign investors. Numerous investment opportunities exist in the agriculture, manufacturing, tourism and mining sectors across various regions of the country. Almost all provinces in Zambia remain potential areas of investment whose resources remain largely untapped. Its active participation in the SADC Trade protocol and the COMESA/FTA offers preferential tariff access to a market of nearly 380 million people. A key challenge in developing this economic potential and enhancing the wealth creation capability of Zambians to drive growth and development is the ability to access long term investment capital especially for economically viable projects at start-up level. Financial institutions are critical in this process of mobilising and channeling these investment resources. To do so successfully, the industry must identify the constraints to the provision of finance and credit and provide innovative solutions to address them. Such innovations may include venture capital funds, structured finance products, equity and other innovations that allow a more efficient management of risks during the initial stages of the business cycle. On its part, the Bank of Zambia needs to ensure that there is sustainable stable macroeconomic environment first. But we also need to have a good understanding of the financial innovations that may be needed to attract and disburse investment capital. This is important if we are to ensure that monetary and supervisory policy frameworks are fully supportive of the ability of the financial sector to finance growth and development. Zambia today has a large portfolio of large scale industrial and energy projects such as the Multi Facility Economic Zones (MFEZ) and several large and small hydro-power projects. These require innovative financial solutions as well as varied sources of finance and expertise, both domestic and foreign. Ladies and Gentlemen, as you may be aware, the banking sector in Zambia has over the last few years, witnessed significant growth in lending. The credit expansion has no doubt brought significant benefits to the economy as resources are channeled through to the lower end of the market. However, most of the credit extended by banks and microfinance institutions is targeted at already established enterprises and individuals in formal employment. Only an insignificant amount is extended to start-up initiatives or businesses with potential for growth. In order to bridge this financing gap, it is pertinent to establish financing arrangements such as Venture Capital Funds. Venture Capital Funds are essentially collective investment schemes where investors place their money into a Fund with the aim of achieving greater impact and security than could be realised individually. Venture Capital Funds seek to provide finance to enable businesses to start-up, expand or restructure through the use of equity and quasi-equity instruments such as preference shares, convertible debentures, and shareholders loans that reflect the risk and reward in investing in such businesses. Furthermore, given the relatively high interest rates prevailing, debt financing is not easily available to start-up and other emerging enterprises because they generally lack the collateral, track record, or earnings required to get loans. To this effect, venture capital funds can be essential to these enterprises as they are a combination of equity and professional know-how. To be attractive investment vehicles, venture capital firms must be able to deliver a rate of return that is more attractive than those available in markets for publicly traded stocks and other securities. Mr Chairman, in line with the workshop theme, “exploring and creating financial opportunities”, it should be noted that the financial sector in Zambia is considered relatively under-developed and has had limited reach to all sectors of the economy. A 2005 study by Finmark Trust revealed that only 33% of the total population in Zambia had access to financial services. The survey also revealed that most Zambians prefer to invest in nonfinancial instruments such as a businesses, livestock, land or agricultural equipment. In recognition of the strategic importance of the financial sector to the country’s development and poverty reduction efforts, the Zambian Government launched the Financial Sector Development Plan (FSDP) in 2004 to address weaknesses that had been identified in the financial sector. The FSDP is a comprehensive strategy that is aimed at achieving a financial system that is sound, stable and market-based, that would support efficient resource mobilization necessary for economic diversification and sustainable growth. The weaknesses noted in the financial sector are addressed through a public and private sector partnership. A number of activities have already been undertaken under the FSDP such as the establishment of a Credit Reference Bureau. Similarly policies and the legal and regulatory frameworks have been developed to take into account the fast changing financial environment. These developments have resulted in a considerable increase in the number of banks and other financial service providers in the country. Ladies and Gentlemen, this workshop is therefore timely as it tries to bring together Zambian financial sector players and international financial players who have an interest to see that Zambia takes its rightful place in the world economy. Apart from being a sensitisation platform to the general public, this workshop should diligently explore ways on how entrepreneurs can access venture capital funds in Zambia. Although venture capital organizations in Zambia are not many and evident to the general populace, our expectation is that after this workshop, we shall see the emergence of an interactive and symbiotic alliance between International and Zambia financial institutions. This alliance is expected to provide venture capital funds and financial services that should uplift the well-being of the Zambian people at large. This sounds like a difficult task to achieve but it is my conviction that it is better to begin a step towards this direction rather than waiting for it to happen in future. Mr Chairman, as I conclude, let me take this opportunity to guide the participants that discipline is key in accessing venture capital funds. It is common practice in Zambia for entrepreneurs to mis-apply funds obtained for capital purposes. Instead of growing businesses, we tend to use funds obtained as loans, for luxurious goods such as latest cars, suits etc. This results in business failures and thus non-performing loans for banks and thereby higher interest rates. It is also important to realise that not all projects can access venture capital funds. Only innovative, high quality and highly profitable projects may qualify for these funds. Therefore applicants of these funds should think outside the box and provide well researched project plans that meet international standards. In this regard it is key for project promoters to collaborate and pool resources as a team instead of the usual norm of going it alone. In addition, as we are all aware, small and medium sized enterprises form the engine of economic and social development as they generate employment, and are an ingredient to growth and international competitiveness. It is therefore imperative that this key sector rises to the challenge and creates wealth through innovative entrepreneurship. A disciplined, innovative and successful SME sector will no doubt make Zambia an attractive destination for more venture capital. To this effect, this workshop on venture capital should explore ways to support efficient resource mobilization for SMEs. Distinguished Ladies and Gentlemen, with these few remarks, I now declare this workshop officially opened. I thank you for your attention and God bless your deliberations. | bank of zambia | 2,010 | 1 |
Remarks by Mr Caleb M Fundanga, Governor of the Bank of Zambia, at the Handover Ceremony of computers to Mumbwa High School, Mumbwa, 4 February 2010. | Caleb M Fundanga: Improving school infrastructure in Zambia Remarks by Mr Caleb M Fundanga, Governor of the Bank of Zambia, at the Handover Ceremony of computers to Mumbwa High School, Mumbwa, 4 February 2010. * * * The Board Chairperson, Mr Gracious Hamatala Board Members Present The PTA Chairperson, Mr Mwila Kabange The Headmaster, Mr Kizito Kalonga Distinguished Teachers Students Members of the Press Ladies and Gentlemen It is an honour and privilege for me to be with you today as the Bank of Zambia makes this humble donation of 5 computers to Mumbwa High School. I am also glad because in some small way we are making a contribution towards ensuring a brighter future for the students. Chairpersons, I am informed about the numerous challenges and difficulties, the school continues to face in its quest to produce high quality education to students. For instance, I am aware that there is a critical low level of books compared to the population of students in the school. Further, having been established 40 years ago, the School’s infrastructure urgently needs to be rehabilitated. The refurbishment of infrastructure is not an easy task but in the able leadership of the Board Chairperson, I have no doubt that a solution will be found in good time. As we grapple with the ways and means of improving the school infrastructure, let me reiterate that the school need to maintain and protect the little infrastructure available. It is of paramount importance that the school put in place measures to avert rampant vandalism. Ladies and Gentlemen, let me also mention here that the challenges I have just outlined are not only common to Mumbwa High School, but are experienced in many Government schools. We also realize that the Government has limited resources and cannot attend to the problems of every school in the country at one time. It is for this reason that the Bank of Zambia has continued to donate used computers to several schools around the country. In 2009, the Bank donated a total of 60 computers to various schools including Mumbwa High School, David Kaunda Technical High School, Information and Communications Technology Ladders, and St Francis of Assisi in Lusaka. We are hoping that through these donations the beneficiary schools will sustain and improve the academic performance while bridging the digital divide. Further, a number of schools including our own Mumbwa High School do not have internet access to enable teachers carry out their research activities. In order to improve performance in class, we need to ensure that we enhance the capacity of our teachers. We must recognise that computers alone are not magic and neither should they replace chalk and blackboards, but they should and can be used as a tool to aid learning. Providing more computers at schools will do little without providing the tools that enhance teaching and research like internet. It is also pertinent that teachers obtain quality and professional training to harness and effectively utilise computers. I therefore urge you to consider enhancing computer literacy amongst your staff. In an information age, knowledge and effective use of computers along with sound education will be the cornerstone of a vibrant, modern society. This is why our teachers are absolutely critical to the future of our economy. I have no doubt that supporting our schools in the manner that the Bank of Zambia is doing today will lead to stronger motivation and morale amongst our students and teachers alike. I am certain that we all desire a country where our teachers and students are proficient in using computers and extract immense value from them. This should be the vision that we should all aspire. Ladies and Gentlemen, In conclusion, I would like to urge all students present here today take an interest in using computers. Computers will assist you in your studies and make your lessons more effective, easier and enjoyable but they will not automatically make you a genius. The computer will open doors to communication, research and opportunities. Remember that the goal of computer literacy is for the user to become an explorer, and an active seeker of information which I hope you will be, with this donation. Seize what you have been bestowed with today. Guard against vandalism and use the computer facilities to ensure a brighter future for yourselves. This is important because in future while computer knowledge will perhaps not immediately get you a job, it will ensure that you are one step closer to being employed. Ladies and Gentlemen, I also recognize the efforts of the former Students Association who have been soliciting for donations from various organizations. As former students we all have the responsibility of helping the school that has played a key part to what you are today. Let us continue to support our beloved school. I thank you. | bank of zambia | 2,010 | 2 |
Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the farewell cocktail hosted in honour of the Barclays Bank Zamia Limited Managing Director, Lusaka, 4 February 2010. | Caleb M Fundanga: Financial sector development in Zambia Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the farewell cocktail hosted in honour of the Barclays Bank Zamia Limited Managing Director, Lusaka, 4 February 2010. * * * The Chairman – Barclays Bank Zambia Plc, Mr J J Sikazwe The Chairman – Bankers Association of Zambia, Mr Saviour Chibiya Chief Executive Officers of Commercial Banks Outgoing Barclays Southern Africa Regional Managing Director, Mr Zafar Masud Acting Barclays Bank Plc, Managing Director, Mr Bret Packard Management and Staff of Barclays Bank Zambia Plc Colleagues from Bank of Zambia Distinguished Guests Ladies and Gentlemen Ladies and gentlemen I am privileged to officiate at this farewell cocktail as we say goodbye to Mr. Zafar Masud who has been the Managing Director of Barclays Bank Zambia since January 2008. In the past few years, Barclays Bank Zambia Plc has contributed to making banking more accessible through its outreach programme which saw an increase in its ATM and branch network to over 150 ATMs and 55 distribution points comprising branches and agencies nationwide. Clearly the grass-root population in Zambia has continued to benefit from this initiative. As is the case with a number of other banks, Barclays Bank Zambia Plc has continued to innovate and positively contribute to financial sector development in Zambia. Notable innovations that came under Mr. Masud’s time include the commissioning of the bank’s Branch Queue Management System at its Mutaba and Kafue House branches and Northend ATM Lobby, as well as the launch of Premier Banking. Barclays Bank Zambia Plc may have not pioneered all of these innovations, but they have provided reasonable competition to their colleagues which we at Bank of Zambia believe will be of benefit to the Zambian financial sector in the medium to long-term. It is my expectation that Barclays Bank Zambia PLC will continued to contest the market in a meaningful and beneficial way. Let me also acknowledge the contribution made by Barclays Bank Zambia Plc under Mr. Masud through the bank’s partnering with the corporate world to cosponsor the first ever Euromoney Investors’ Conference in Zambia. In addition, it is worth mentioning that BAZ, under the chairmanship of Barclays Bank Zambia Plc and Mr. Masud, helped initiate the beautification of Cairo Road by adopting the maintenance of its wonderful gardens. The positive change to our immediate surroundings particularly around the Bank Square is there for all to see. Further, Barclays Bank Zambia has continued to work closely with Junior Achievement Zambia where I serve on the Board. The bank has been providing office space as well as hosting the meetings of Junior Achievement at its premises. As a matter of fact, on 22 February, 2009, the Junior Achievement Worldwide/Barclays Bank partnership was launched in Dubai. As a result of this partnership JA Zambia receives annual grants which are utilized to deliver JA entrepreneurship and work-readiness education to the local young people. I further wish to acknowledge the contribution that Barclays Bank Zambia Plc continues to make to the development and deepening of the banking sector in Zambia. Clearly Mr. Masud has been a key factor in the process and our expectation is that the incoming caretaker Managing Director Mr. Bret Packard will continue to progress this process. It is in this vein ladies and gentlemen that I request you to join me in formally wish Mr. Masud success in his future endeavors as we welcome Mr. Bret Packard, the new Acting Managing Director at Barclays Bank Zambia Plc. Thank you. | bank of zambia | 2,010 | 2 |
Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Eastern and Southern African Management Institute (ESAMI) launch of MBA Alumni Zambia Chapter, Lusaka, 12 February 2010. | Caleb M Fundanga: Innovation for leadership excellency Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Eastern and Southern African Management Institute (ESAMI) launch of MBA Alumni Zambia Chapter, Lusaka, 12 February 2010. * * * The Eastern and Southern African Management Institute (ESAMI) Director General, Prof. Bonnard Mwape; The President, ESAMI MBA Alumni Zambia Chapter, Mr. Christopher Mulenga; The Ecobank Zambia Limited Managing Director, Mrs Charity Lumpa; ESAMI Alumni; Distinguished Invited Guests; Members of the Press; Ladies and Gentlemen. It is a great pleasure for me to officiate at the launch of the ESAMI MBA Alumni Zambia Chapter. I wish to take this opportunity to welcome Prof. Bonnard Mwape and other ESAMI staff that have travelled from Arusha to come and witness this important occasion. I am particularly delighted to be part of this launch because my first interaction with the ESAMI MBA alumni members was during the recent summer school event held in Arusha, Tanzania, where I was invited to present a paper on “The Effects of the Global Economic Crisis on Zambia”. Indeed my memories of that lively interaction are still very fresh and that is why I graciously accepted to officiate at this function when I received the invitation from the President of the association. Ladies and Gentlemen allow me to congratulate the President and his team for this excellent initiative of bringing together individuals with a common academic background under the Alumni umbrella. I am informed that one of the objectives of the Association is to utilise the acquired scholarly knowledge and experience to add value to society through leadership in various projects and initiatives. I know that alumni associations world over have existed for centuries and most of them have one basic principle, that of benefiting members wherever they may be and for free. However I am told that your association other than just carryout activities for the benefit of members will go a step further to do benevolent activities for the benefit of society at large. This is commendable and I am looking forward to see what initiatives you have outlined to advance welfare in our society. Mr President, the theme for this launch this evening “Innovation for Leadership Excellency” is indeed very timely and appropriate to the norms and beliefs that I am told your association espouses. It is innovations such as yours that gives us the comfort that you are indeed giving back to society following the huge resources that were invested in making it possible for you to acquire this very important qualification the Masters in Business Administration from ESAMI. You have been schooled as business managers and therefore it is inevitable that what is expected of you is nothing short of leadership excellence. We shall all be looking up to you to offer solutions to the business and economic challenges that your institutions and the economy as a whole are faced with. As some of you may recall, during my presentation in Arusha, I did indicate that our economy had shown some resilience in the midst of the global economic crisis. I am delighted to inform you that following the presentation, we have seen further improvements in macroeconomic indicators with GDP growth for 2009 estimated at 6.3% while inflation edged downwards to 9.9% in December 2009 and 9.6% at end January 2010. The exchange rate of the Kwacha against major international currencies has also shown some stability in the recent months. This is no mean achievement and credit must go the Government for providing a stable macroeconomic environment. However, the recent crisis has exposed clear gaps that need to be addressed in order to create wealth and reduce the high levels of poverty in our country. There is need to have innovative solutions to the problems that our economy faces today. These innovative solutions are expected to come from various stakeholders including associations such as yours. For us to make a significant dent on poverty, the economy should record growth rates of 8% and above. This can only be achieved by innovation and competitiveness on the world market. Ladies and Gentlemen, despite the stable macroeconomic environment, we have not reaped full benefits from the international trade arena. There is need for Zambian products to penetrate into various markets such as the USA under the Africa Growth and Opportunity Act, (AGOA) the European Union under the Everything but Arms Initiative, as well the Chinese, Canadian and other markets. Access into the regional markets through regional arrangements such as COMESA and SADC should also be promoted. We also need to take full advantage and actively participate in the manufacturing sector through the established Multi-facility Economic Zones (MFEZ). As educated and hard working Zambians with MBAs, it is imperative that you are able to apply some of the relevant skills and knowledge gained in your studies to everyday situations in businesses. The challenge is for you to steer your organisations and businesses to success and to progress in a way that will lead to economic advancement of the country. That in my view is what “Innovation for Leadership Excellency” means. As educated Zambians, we need to offer business solutions where there are none. I am happy that today we are witnessing the launch of this association whose, among other objectives is to offer business solutions. Mr President, allow me as I conclude to advise you and your new association to ensure that all members demonstrate high ethical standards and values in your businesses as well as places of work at all times. I urge all of you gathered here today to take ethics seriously in order to enhance efficient and effective delivery of services. A robust and strong level of ethics can be achieved by providing ethics training and sensitisation as a component of continuous professional development. Although you are well qualified and are competent in your respective fields, it is vital that you have continuous training including advancement in ethical knowledge. Equally there is need to promote and ensure that your members exercise high levels of Integrity in whatever they do. As a country, we need professionals with high levels of social and moral awareness so that all of us are aware of the moral obligations and potential impact of our thinking, decisions and actions. We need to be good role models for others in behaviour, attitude and relationships. Let us endeavour to act in a way that is professional and that retains the confidence of others at all times. With these few remarks, it is now my honour and privilege to declare the ESAMI MBA Alumni Association Zambia Chapter officially launched. I thank you. | bank of zambia | 2,010 | 2 |
Opening remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the official launch of the Access Bank Zambia Limited Acacia and Longacres branches and the Visa Debit Card, Lusaka, 16 February 2010. | Caleb M Fundanga: Enhancing access to finance in Zambia Opening remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the official launch of the Access Bank Zambia Limited Acacia and Longacres branches and the Visa Debit Card, Lusaka, 16 February 2010. * * * Your Excellency the High Commissioner of the Republic of Nigeria in Zambia, Ms Marcus Folake Bello; The Chairman of the Board Access Bank Zambia Ltd, Mr Caleb Mulenga; The Group Deputy Managing Director, Access Bank Plc, Mr Herbert Wigwe; The Managing Director, Access Bank Zambia Ltd, Mrs Mukwandi Chibesakunda; Members of the Board of Directors for Access Bank Zambia Ltd, present; Management and Staff of Access Bank Zambia Ltd; Colleagues from Bank of Zambia; Distinguished Invited Guests; Members of the Press; Ladies and Gentlemen. It is my privilege and honour to officiate at this important launch of the Longacres and Acacia branches of Access Bank Zambia Limited. As the Central Bank and regulator of the banking sector, we are always pleased to be associated with the achievements of the institutions that we regulate, particularly where these developments lead to increased access to banking services as well as convenience for the Zambian public. Ladies and Gentlemen, it is a well known fact that bank branch expansion programmes play an important role in increasing access to the banking services. It is also true that such developments will not only bring banking services closer to those who need them, but also improve competition among banks in Zambia while creating jobs for our people. However, there is need to complement physical branch expansion with product innovation programmes that will capture a lot more people in the remote areas of our country. In addition, the crucial role that banks play in financial intermediation cannot be overemphasised. The real challenge is for all financial sector players to play their honest part in enhancing savings mobilization and to effectively channel the public’s savings to support financing of economic activities in all parts of the country. Chairperson, it is pleasing to note that despite the recent challenges facing the global economies, Access Bank Zambia Limited remains committed to growth through its efforts to expand its branch network and through product innovation. Although the bank has been in existence for just under two years, it now has three branches which is a very welcome development. I am certain that this development will go a long way in enhancing access to finance. Furthermore, I am reliably informed that the bank is earmarked not only to expand its branch network to five this year but also bring to the financial sector some exciting and innovative products. An example of this is the Visa Debit-card which was launched today. It is the Bank of Zambia’s expectation that these efforts, accompanied by prudence in risk management, will contribute to the further deepening of our financial markets. However, I must mention here that, most banks in Zambia have concentrated their branches expansion programmes in the already banked districts of our country. We still have a number of districts with a lot of economic potential but without financial service providers. This entails that civil servants and other citizens in formal employment have to travel long distances and in some instances for a number of days before they can access their salaries. Furthermore, income earning citizens in the informal sector like fishermen and farmers cannot deposit their earnings in a safe savings account due to the absence of bank branches. Most of our people cannot borrow loans to further create wealth by growing their projects. A number of them end up losing their hard earned income in fires, theft and other calamities. It is also very common for hard working women to lose their little incomes to their beer drinking husbands who know where their wives keep their little savings. I therefore, wish to challenge Access Bank through the Group Deputy Managing Director as well as the Managing Director of Access Bank in Zambia to consider opening branches in areas like Chavuma, Chiengi, Gwembe, Chilubi, Lufwanyama, Mufumbwe and several others to tap into the vast potential these places possess. This will not only improve financial inclusion but will also provide you with new customers and thus a higher deposit base. I am certain that over time these places will be your most profitable centers as places like Lusaka will only yield narrow margins due to stiff competition. Chairperson, Zambia’s economy has shown some resilience in the midst of the global economic crisis. As you are aware, the economy has posted some marked improvements in macroeconomic indicators in 2009 with GDP growth estimated at 6.3%. Both inflation and the yield rates on Government securities have edged downwards while the exchange rate of the Kwacha against major international currencies has also shown some stability in the recent months. It is for this reason that I reiterate my appeal to all financial service providers including Access Bank Zambia Limited, to make some meaningful efforts in addressing the high cost of banking services in the country. It is also my expectation that the banking sector will take advantage of opportunities arising from the conducive macroeconomic environment in the country to create wealth and contribute to the development in our economy. Finally, let me extend my gratitude to the Board of Directors and the Managing Director of Access Bank Zambia Limited for inviting me to officiate at this launch of the two branches and the Visa Debit Card. I also wish to particularly thank the Access Bank, Group Deputy Managing Director, Mr Herbert Wigwe for having travelled all the way from Nigeria, to come and be part of this event today. It now gives me great pleasure and honour to declare the Acacia and Longarces branches officially launched. I thank you for your attention. | bank of zambia | 2,010 | 2 |
Opening remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Official Launch of the Financial Institutions' Exhibition and Workshop in commemoration of International Women's Day 2010, Lusaka, 5 March 2010. | Caleb M Fundanga: Equal rights, equal opportunities – progress for all Opening remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Official Launch of the Financial Institutions’ Exhibition and Workshop in commemoration of International Women’s Day 2010, Lusaka, 5 March 2010. * * * The Deputy Permanent Secretary, Gender and Women in Development, Ms Christine Kalamwina; The International Labour Organisation Country Director, Mr Gerry Finnegan; The Deputy Governor – Administration, Bank of Zambia, Dr Tukiya Kankasa-Mabula; Chief Executives and Representatives of Exhibiting Institutions; Heads of Non Governmental Organisations; Distinguished Invited Guests; Members of the Press; Ladies and Gentlemen It is my honour and privilege to participate in the launch of this important exhibition by financial institutions in commemoration of the International Women’s Day for 2010 under the global theme “Equal Rights, Equal Opportunities: Progress for All.” Ladies and Gentlemen, as you may be aware, the International Year for Women was declared by the United Nations in 1975. Since then many countries world over celebrate International Women’s Day to recognise the achievements of women without regard to national, ethnic, cultural, economic or political divisions. International Women’s Day is an occasion to look back on past struggles and accomplishments but even more importantly a time to look ahead to untapped potential and opportunities that await future generations of women. Each year on this special day, hundreds of International Women’s Day events occur all around the world. The events range from small random informal gatherings to large-scale highly organised events to celebrate women’s advancement while highlighting the need for continued vigilance and action. A good number of Governments around the world, have made commitments to promote gender equality, by among other things, taking initiatives to integrate gender perspectives into national budgets or development plans in order to reflect the differentiated needs of women and men. Zambia is no exception. In Zambia, it is recognised that the creation of the Ministry of Gender and Women in Development, is a deliberate effort by the Government to ensure that the needs of women are addressed. Through the Ministry we are able to recognise the strides that have been made by women in national development and we look ahead to the challenges that are before us as we strive to achieve our goal of gender equality. In addition, Zambia is a signatory to the SADC Declaration on Gender and Development. This declaration calls for the equal representation of women and men in the decision making process of member states at all levels. I must concede here that, although we have made significant strides as a country in women representation, more still needs to be done. We are however encouraged that there are a good number of women with potential and ability to rise above any form of challenge. We need to use our national development plans as a platform to achieve our Vision to be a prosperous middle income country by 2030, by equally empowering both women and men. Indeed, without the participation of women, who make up more than 50% of Zambia’s population, it will not be possible to achieve our Vision 2030. Distinguished Participants, as you are well aware, over the last decade, Zambia has recorded positive economic growth averaging 5%–6% per annum. The macroeconomic environment has improved with the achievement of low levels of inflation, a relatively stable exchange rate as well as reduced interest rates. In addition, we have seen increased investments in the mining, construction and other productive sectors. This improved environment presents great opportunities for our women to realise their economic potential. However, women can only realise their true potential, if they have access to education and play a full role in the decision-making processes at all levels of society. fact, in the developmental process, women often take centre stage in the running of small and medium-scale enterprises ranging from agriculture, mining and tourism to manufacturing as well as cross border trading. However, in order to grow these businesses, access to affordable financing is pertinent. The role played by the various players in the financial sector can, therefore, not be over-emphasized as businesses depend on a safe place to save money, maintain working capital and also access loan facilities. Ladies and Gentlemen, the 2005 FinScope Survey conducted under the Financial Sector Development Plan (FSDP) confirmed that levels of access to financial services in Zambia are extremely low. Only one third of Zambia’s adult population was reported to have had access to a financial service or product. Further, fewer than 15% of adult Zambians were reported to have access to commercial banks. The Survey further indicated that only 11.6% of women are banked compared to 17.5% of banked men whilst 82% of women have never had a bank account compared to 73% for men. A follow on update survey was undertaken in 2009 and the results are expected to be launched during the second quarter of 2010. However, preliminary analysis indicates that the levels of access still remain low. This is no doubt an indication that more needs to be done to increase access to financial services. On its part, the Bank of Zambia has incorporated the promotion of financial inclusion as one of its strategic objectives for the 2008–2011 Strategic Plan. We believe that increased extension of financial services to ordinary citizens and small business enterprises will play a vital role in poverty reduction and economic growth. Further, by maintaining low inflation and promoting a safe and stable financial system, the Bank ensures that people’s incomes are safeguarded and prices of goods and services are stable. Furthermore, in 2009, the Government approved the extension to the initial five-years of the FSDP in order to continue the national strategy of strengthening our financial sector and enhancing financial inclusion. The second phase of the FSDP will focus on three main pillars namely: (i) enhancing market infrastructure; (ii) increasing competition; and (iii) increasing access to finance. Overall, the vision is to have a dynamic and inclusive financial sector that supports all aspects of the economy. Therefore, the theme for this workshop and exhibition “Enhancing Financial Access for Women: A Tool for Poverty Reduction” is timely and appropriate. Our aim is to recognise and heighten awareness of women’s issues within this context. More specifically, the main objective of this forum is to showcase a variety of financial services and products available and sensitize the general public on: (i) how financial institutions are contributing to increasing gender financing in Zambia; (ii) bringing awareness to the women on the opportunities that are available for them to access finance and mitigate related challenges; (iii) the role of the Bank of Zambia and other financial institutions in meeting the objective of financial inclusion; (iv) how the United Nations as the lead international organisation and other local agencies are supporting women in Zambia; and (v) sharing experiences in running businesses, and the opportunities and challenges in accessing finance in order to grow the income base. The exhibition gives us an opportunity to identify women’s potential and encourage them to stand up and be counted and, contribute to the development of this country. The workshop and exhibition also gives us an opportunity to make the “marginalized woman” aware of the various financial services and products that are available to them. Distinguished Participants, I am glad to note that many products on exhibit here include those targeted at the ordinary citizen and more specifically women, as opposed to large corporates and men. This is a very welcome development as one of the challenges to women accessing finance is the stringent requirements, which most women are unable to meet. Furthermore, despite the recent marked improvements in macroeconomic indicators, alluded to earlier, interest rates and bank charges continue to be unaffordable to the majority of our people especially women. It is for this reason that I reiterate my appeal to all financial service providers especially those who are present here today, to make some meaningful efforts in addressing the high cost of financial services in the country. There is a need for financial service providers to think outside the box and design financial products that are affordable and can easily be accessed by women for various projects at all levels of society including the community. I have in mind here, financing models used in most Asian countries such as the Grameen Bank model in Bangladesh which has demonstrated that women’s potential to contribute towards poverty reduction can be unlocked through provision of finance at community level. Indeed the Grameen Bank model has also proved that women have a good habit of paying back their loans. It is also fitting that women’s potential to contribute to development should be acknowledged and their potential to drive change should be recognised. Although women are yet to gain equality, they are helping to move their families and communities out of poverty. With a little more support, so much more could be achieved. It is my hope that access to finance by women will be enhanced through this exhibition. I am however, pleased to note that, today, more financial institutions are providing financial services to women in Zambia. More women and girls are learning to read and write. We also see throughout the country that women are discovering a new level of economic independence. They’re contributing more to their families and communities. They’re gaining access to credit and jobs that can give them a decent standing of living. This is desirable and should be encouraged. As I conclude, let me extend my gratitude to all the participants and resource persons and commend all the institutions that have taken part to organise both the workshop and exhibition. Let me also take this opportunity to appreciate the efforts by our cooperating partners in the financing of activities promoting gender equality. This is evident by the number of agencies and non-governmental organizations looking at women’s issues, most of which are represented, here, today. Ladies and Gentlemen, International Women’s Day celebrates the collective power of women past, present and future. I believe the next few days will therefore be very informative and entertaining. I am certain that everyone will find this exhibition and forum beneficial and I wish you all a successful event. I thank you. | bank of zambia | 2,010 | 3 |
Opening remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Commemoration of the Worlds Consumer Rights Day, Lusaka, 15 March 2010. | Caleb M Fundanga: The role of Bank of Zambia in sensitising and protection of consumers regarding banking and financial services Opening remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Commemoration of the Worlds Consumer Rights Day, Lusaka, 15 March 2010. * * * The Minister of Commerce Trade and Industry, Hon Felix Mutati M.P. The Permanent Secretary, Ministry of Commerce Trade and Industry, Dr Buleti Nsemukila The Chairperson Bankers Association of Zambia, Mr Saviour Chibiya Representatives from Zambia Competition Commission Distinguished Invited Guests Members of the Press Ladies and Gentlemen I am honoured and thankful to the Ministry of Commerce, Trade and Industry for inviting me to participate on this very important day when we commemorate the “World Consumer Rights Day”. The theme for this year is certainly an interesting and important one especially for us in the financial sector. As the authority that formulates and implements, monetary and supervisory policies, the Bank of Zambia places great importance on the welfare of consumers. This is because effective implementation of monetary and supervisory policies promotes price stability as well as financial system stability which in turn creates a favourable investment climate necessary for economic growth. This entails achieving and maintaining a low inflation rate which is key in attaining low cost of credit as well as low levels of prices for goods and services in the economy. Ladies and Gentlemen, as most of you would recall, high levels of inflation and interest rates as well as bank failures were a central feature of the Zambian economy during the early 1980’s and the mid-1990s. However, since then strides have been made in achieving low levels of inflation and interest rates and a stable financial sector. As a result, inflation has fallen from 138.3 percent at the end of December 1993 to 9.9 percent in December 2009. The lower levels of inflation have had a direct bearing on consumers as their incomes are not significantly eroded. Furthermore, the Bank of Zambia has strengthened its supervisory framework by amending legislation and capacity building in the supervisory process. This process has allowed the Bank to ensure that only fit and proper persons are allowed to enter the financial sector in order to ensure that banks are run professionally and that depositors’ funds are not abused. In order to further cushion depositors in case of bank failures, the Bank is in the process of introducing a Deposit Protection Act and a Deposit Protection Scheme. This will not only create a safety net for depositors but will enhance confidence in the banking sector. Notwithstanding these positive developments, there has been a marked increase in customer complaints, mostly emanating from the banks’ pricing structure, especially on commissions, fees and service charges. Given the prevailing liberalised economic environment, interest rates are determined by the market. Although we have seen significant improvements in the macroeconomic indicators, the levels of interest rates still remain high. This is a major concern to the Bank of Zambia and we have continued to engage banks through the Bankers Association of Zambia on this issue. Ladies and Gentlemen, it is worth mentioning here that one of the challenges that banks continue to face is the high levels of non-performing loans due to poor credit culture amongst some borrowers. It is therefore important that credit worthy customers are distinguished from high risky borrowers in the banking sector. The Bank of Zambia through the Financial Sector Development Plan has in this regard established the credit reference bureau. The credit reference bureau will enable lenders to make decision based on information specific to each borrower ensuring that risk assessments of potential borrowers are not affected by the habits of other borrowers. Therefore, the pricing of risk will be more reflective of borrower’s particular circumstances. Further, the Bank of Zambia has made it mandatory for banks and other financial service providers to use the credit reference bureau before a loan is provided to any customer. Consequently any loans approved without passing through the Credit Reference Bureau will attract regulatory action. The Bank of Zambia also places great importance on the need to have knowledgeable consumers who play a key role in creating a competitive and fair business environment. To this end, the Bank promotes consumer awareness and financial literacy by disseminating information through quarterly media briefs, road shows, and attendance at annual agricultural shows and trade fairs. The Bank of Zambia also consolidates tariff guides of all deposit taking financial institutions and publishes this information in a form suitable to make immediate and easy comparisons. The purpose of this quarterly publication is to enable customers shop around in order to get value for money from services provided by banks and to cause banks to be competitive in the manner they set fees and charges. Further, through the activities of the Financial Sector Development Plan, the BoZ intends to spearhead the development of a national financial education strategy in order to galvanise the efforts of various stakeholders in the delivery of financial services. The Bank also publishes a lot of information on the banking sector and the economy in general on its website www.boz.zm. I wish to urge all consumers who may have access to the internet, to make it a habit to visit the Bank of Zambia website on a regular basis. Further, the Bank will provide excerpts from the Banking and Financial Services Act to provide some highlights on some of the consumer protection provisions in the Law. I thank you. | bank of zambia | 2,010 | 3 |
Opening remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Bank of Zambia/Deutsche Bank workshop on Capital Markets, Lusaka, 15 April 2010. | Caleb M Fundanga: Improved economic and financial developments in Zambia Opening remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Bank of Zambia/Deutsche Bank workshop on Capital Markets, Lusaka, 15 April 2010. * * * The Deputy Governor – Operations at Bank of Zambia Officials from Deutsche Bank Officials from the Ministry of Finance and National Planning Distinguished Resource Persons Colleagues from the Bank of Zambia Ladies and Gentlemen I am delighted to officiate at this important workshop on Sovereign Bond Issuance. Let me from the onset express my gratitude to our colleagues from Deutsche Bank who have demonstrated a desire and commitment to share with us their experiences in the area of international capital markets, particularly with respect to sovereign debt issues and ratings. I am particularly delighted that this workshop is a follow up to an earlier meeting with officials from Deustche Bank in December 2009. The willingness of the Deutsche Bank officials to come back four months later to further discuss the issues with a wider audience is truly heartening to us and commendable indeed. Ladies and Gentlemen, Zambia like many other countries in Sub-Saharan Africa is one of the countries that have for a long time relied on concessional funding and multilateral financial support in implementing her development agenda. Whereas other parts of the world have enjoyed respectable growth rates supported by private capital flows, our region has lagged behind. Several years of debilitating external debt, regional political instability, and doubtful macroeconomic management have all played a role in keeping private capital flows away from our economies. However, with endurance, progress in the region generally and Zambia in particularly is certainly being recorded. A glimmer of hope is finally showing that we are once again being welcomed in the international capital market arena. As you are aware, the Government has over the years set out programs to reform the country’s political and economic platforms. Politically, Zambia has been one of the most stable democracies in Africa boasting peace since independence in 1964. On the economic front, Zambia has made respectable progress in the area of macroeconomic management. Over the recent past, the Zambian economy has performed relatively well. This is reflected in positive growth rates of real Gross Domestic Product (GDP), low inflation, relatively stable exchange rate, stable financial sector and improved banking services. In addition, Zambia’s access to the Highly Indebted Poor Country Initiative and the Multi-lateral Debt Relief Initiative resources drastically reduced the country’s onerous debt burden from around US $ 7 billion to below US $ 1 billion. The removal of the debt burden also made Zambia more attractive to foreign direct investment and capital flows, that have been an important source of investment financing. Furthermore, over the recent past, the growth in the real Gross Domestic Product (GDP) has remained positive and above 5% for the last six years. Despite the adverse effects of the recent global economic crisis, the country recorded an impressive real GDP growth of 6.3% in 2009. This is at a time when other countries in the region and world over were posting negative growth rates. The country also attained a single-digit inflation level of 9.9% at end December 2009 while the exchange rate of the Kwacha against major currencies has remained relatively stable. In addition, the financial sector has been stable with improvement in banking services. These impressive economic trends suggest that the reform programmes that the Government has implemented are now bearing fruit. The reforms have focused on the restructuring of the economy, to let markets determine key decisions so as to allow the private sector take the lead in providing investment in the economy. However, despite the progress noted above, we are still far from achieving many of our developmental objectives. We are alive to the fact that we cannot achieve our development ambitions if we close ourselves from the rest of the world. The economy faces enormous financing needs especially in view of the high levels of poverty among our people. We are also alive to the fact that these challenges do not just end at obtaining a good sovereign rating or raising low-cost finance, but more importantly prudently deploying funds raised to projects with a high rate of both social and economic return. This is the challenge we face. Ladies and Gentlemen, the importance of obtaining a sovereign rating and issuing a sovereign bond cannot be over-emphasised. By providing access to long term funds, a sovereign bond issue provides wide possibilities for countries to meet financing needs demanded by their growing economies. At the same time, issuers are assured that their financing needs will be met in an orderly and timely manner. This will no doubt result in cost efficient investments in the economy. In a country like ours a sovereign rating and bond issuance will lead to availability of relatively less costly finance for the timely execution of a number of long term projects in sectors like energy, communication, agriculture and mining. The timely execution of such projects would no doubt accelerate economic growth further and impact positively on the high levels of poverty. This workshop has therefore come at the right time when our countries, which just a few years ago were clearly outsiders in the international capital markets, are also now taking financing decisions to fully participate in the international capital markets. I must admit that international financial markets can be a maze for new entrants, and so updating our skills by consulting others becomes a priority and adds a lot of value. I have little doubt that as you remain deliberating here, the sessions will be very interactive and will provide a lot of food for thought. I am certain that everyone here will find this event beneficial. Ladies and Gentlemen, with these few remarks I hereby declare this workshop officially open. I thank you for your attention. | bank of zambia | 2,010 | 4 |
Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Zambia Association of Manufacturer's Annual General Meeting, Lusaka, 16 April 2010. | Caleb M Fundanga: Review of Zambia’s economy Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Zambia Association of Manufacturer’s Annual General Meeting, Lusaka, 16 April 2010. * * * The President of ZAM – Mr Chance Kabaghe The Vice Presidents (North and South) – Mr Sebastian Kopulande and Mr Eugen Appel The ZAM Executive Committee Captains of Industry Ladies and Gentlemen I feel greatly honoured to officiate at this Annual General Meeting for the Zambia Association of Manufacturers (ZAM). The Bank of Zambia and the Zambia Association of Manufacturers have a long standing relationship which is intertwined in more ways than one. I am sure that without making appropriate policies to support key sectors such as manufacturing, we would be robbing the country of the development that it deserves. I am reliably informed that ZAM has been going through restructuring in the last two years and has achieved a lot in terms of the establishment and making itself relevant not only to its members but to the Government and other stakeholders. It therefore gives me pleasure to stand before you to discuss issues that are pertinent to manufacturing. I am hopeful we will be able to understand the challenges and identify plausible ways of overcoming them for the sector to forge ahead and make a meaningful contribution to the economy. Mr President, the performance of the Zambian economy in 2009 was favourable. Although projections of GDP growth for 2009 had been revised downwards to 4.3% on account of the effects of the global financial and economic melt-down, preliminary data indicates that the economy posted a real GDP growth rate of 6.3% compared with the 5.7% recorded in 2008. Almost all key sectors of the economy recorded positive growth except for restaurants and hotels which saw negative growth due to lower tourist and business travel arrivals during the financial crisis. Annual overall inflation slowed down, reverting to single digit level of 9.9% in December 2009 from the 16.6% recorded in December 2008, and was in line with the original end-year target 1 of no more than 10%. This outturn was attributed to the decline in both annual food and non-food inflation. In the external sector, Zambia’s external position showed remarkable improvement as reflected in the build-up of gross international reserves to 5.1 months of import cover in 2009 from 2.1 months of import cover in 2008. Zambia’s overall balance of payment position is expected to remain favourable in 2010 due to the rebound of copper prices on the international market as well as the expected increase in copper production as some mines increase production to full capacity and the resumption of production at some mines. The rebound in the international price of copper in the second half of 2009 and the return of foreign portfolio flows resulted in an appreciation of the exchange rate of the Kwacha by 4% at the end of the year. However, fiscal performance in 2009 was weak, mainly due to the global economic crisis, which reduced domestic revenues. Despite this, Government remained within the programmed domestic financing for the year. December-2009 inflation revised to 12.0% in the Budget Speech for 2010 presented to Parliament on October 9, 2009. Distinguished Members, the financial sector has remained resilient despite the effects of the recent global financial crisis. Currently, the Zambian financial sector is characterized by high liquidity levels, reflecting tighter lending standards in the wake of the lessons from the global financial crisis leading to marked decline in private sector lending. As a result, the demand for the relatively risk free Government securities has increased causing a decline in yield rates on Government securities. The decline in Government securities yield rates and relatively low inflation experienced since the beginning of the year should contribute to a decline in banks lending rates and thus stimulate borrowing by the private sector. I am aware that the high interest rates in the country pose a very big challenge for our manufacturers to borrow for recapitalisation and expansion of their businesses. Access to finance is essential for the economy to grow and therefore it is necessary that we find ways that could reduce the cost of borrowing to allow key sectors to expand. Ladies and Gentlemen, I wish to reiterate that the economic fundamentals point to a reduction in lending rates. In a liberalised financial market environment, the central bank contributes to the reduction in lending rates by reducing inflation. The Government also contributes by implementing prudent fiscal policy, thus limiting the incidence of crowding out of the private sector by the Government. As a result, yield rates on Government securities fall. As inflation and yield rates on Government securities decline, lending rates are also expected to decline in the medium to long term as the two provide the relevant opportunity cost of lending to the private sector. Another factor that commercial banks take into consideration in determining lending rates is the default risk arising from the poor credit culture in the economy in general. In resolving the problem of poor credit culture, the Central Bank through the Financial Sector Development Plan, facilitated the establishment of a credit reference bureau which collects information on borrowers to be used by credit providers. Furthermore, in order to increase competition in the financial sector the Bank of Zambia has registered a number of commercial banks and other financial institutions to operate in Zambia. In 2009, the number of registered banks increased from 14 to 17. In addition, the Bank of Zambia is developing a framework to migrate from the use of monetary aggregates as the anchor of inflation expectations to the use of interest rates. Inflation expectations are fundamental to the process of interest rate determination and low inflation expectations are entrenched not only by the implementation of appropriate monetary and fiscal policies at any given time, but also by past inflation developments. Low inflation expectations were becoming entrenched in 2008 following two consecutive years of single digit inflation in 2006 and 2007. However, towards the end of 2008, the increase in food prices and the impact of the global financial crisis caused inflation to increase to a double digit figure of 16.6%. In spite of this, the prospects for low inflation, now look positive, creating an appropriate environment for interest rate reduction. Mr President, as you may have noticed from the newspapers in the recent days, a number of banks have reduced their lending base rates though not as much as we would like to see. We hope that this is just a start, and that banks will continue adjusting their rates downwards consistent with developments in other macroeconomic indicators. Distinguished Members, allow me to comment on the statutory instrument regarding the US$5000 over the counter limit on deposits. These regulations are meant to encourage the use of the banking system in order to assist in curbing money laundering. Doing away with this would deprive the Central Bank of a mechanism for detecting fraudulent activities and create a healthy environment for money to be laundered in our financial system. Ladies and Gentlemen, the Bank of Zambia recognises the importance of long term finance for growth. We are also aware of the important role that the Development Bank of Zambia and others institutions that provide long term finance can play in this process. It is for this reason that the Bank of Zambia monitors the performance of these institutions to ensure that they are financially viable to be able to play this important role. Rather than thinking of Government recapitalising these institutions, we should think more in terms of developing the capital markets to enable these institutions raise resources for long term financing from the private sector. On the issue of the foreign exchange market, I wish to emphasise that we have a flexible exchange rate regime that has served us well after doing away with exchange controls in the early 90s. The exchange rate of the Kwacha against other international currencies has enjoyed relative stability since 2003 when the interbank foreign exchange market system (IFEM) was introduced. With this system, the Bank of Zambia intervenes in the market mainly to smoothen fluctuations and to build international reserves. The exchange rate is expected to be driven by economic fundamentals such as the terms of trade. An attempt to fix the exchange rate would have disastrous effects especially when the fundamentals suggest that the rate should depreciate as this would wipe out all the reserves we have struggled to build over the recent past. In such circumstances, the Bank intervenes to moderate short term volatility of the exchange rate but not to change the direction dictated by the fundamentals. On the other hand, an improvement in the terms of trade provides an opportunity for the Bank of Zambia to build reserves as it smoothens the rate of appreciation. Finally, Mr President, I wish to congratulate you on the contribution made by manufacturing sector to the GDP growth in 2009. The performance of the sector was favourable, recording a real growth of 2.5% compared with 1.8% in 2008. I am confident that as the economic fundamentals continue to improve, banks are expected to increase lending to the private sector at reduced rates. We therefore expect the sector’s contribution to growth in 2010 to increase. In order to assist the country’s diversification process away from copper, I wish to implore you to seek ways of enhancing productivity in your various sectors as a means improving competiveness of your products for exports. Mr. President, one way by which your members can contribute to increased GDP is through participation in the Multi-Facility Economic Zones (MFEZs) for which the Government has approved establishment of three. You may wish to note that the construction of the Chambishi MFEZ on the Copperbelt has reached an advanced stage while work on the Lusaka South MFEZ is underway. Several enterprises with significant investments are already being established at the Chambishi MFEZ. There is also a proposal for the establishment of the Lumwana MFEZ in North-western province. These zones are expected to enhance the country’s efforts of promoting value addition to raw materials which will in turn boost the manufacturing sector. They are also consistent with the budget themes for 2009 and 2010 of “Enhancing Growth through Competitiveness and Diversification”. In collaboration with the development partners, Government will provide the necessary support institutions, infrastructure and services conducive to efficient and competitive manufacturing. I would like to strongly encourage Zambian firms particularly members of ZAM to take advantage of the opportunities created under this initiative. Mr President, as I conclude my remarks, I wish you and your members a prosperous 2010. I thank you for your attention. | bank of zambia | 2,010 | 4 |
Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the 2010 Zambia Institute of Chartered Accountants Annual Ball, Lusaka, 24 April 2010. | Caleb M Fundanga: Zambia’s economic overview and its accountancy profession Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the 2010 Zambia Institute of Chartered Accountants Annual Ball, Lusaka, 24 April 2010. * * * The President – Zambia Institute of Chartered Accountants (ZICA), Mr. Chintu Mulendema The President – Eastern, Central and Southern African Federation of Accountants, Mr. Koos Du Toit The President International Federation of Accountants, Mr. Robert Bunting The Secretary & Chief Executive – Zambia Institute of Chartered Accountants, Mr. Hapenga Kabeta The Chief Executive Officer – Eastern, Central and Southern African Federation of Accountants, Mr. Vickson Ncube Distinguished Members of ZICA Members of the Press Ladies and Gentlemen I am greatly honoured to have the opportunity to join you this evening and to say a few words on the important role that the accountancy profession plays in our economy. The importance of the accountancy profession has indeed been highlighted following the recent global financial crisis in which a lack of appropriate governance arrangements and clarity about the inherent risks taken by financial institutions contributed to the near collapse of financial markets in the developed economies. Clearly the accountancy profession has an important role to play in ensuring that the regulatory response to the crisis leads to more robust and transparent financial institutions that serve the needs of households and firms and avoids the build-up of systemic risks. May I take this opportunity to commend ZICA for the tremendous progress it has made in the development of the accountancy profession in Zambia. I am aware that the number of qualified accountants in the country has continued to grow with ZICA boasting a total of 3,606 members as at December 2009 compared to 2,938 in the previous year. This is no doubt a testimony to the growing number of institutions that are offering quality accountancy training courses. The growing number of accountants is also a reflection of the economic achievements the country has scored in the recent past. It is worth noting that as the economy continues to post positive economic growth, the country’s need for accountants will also increase. Distinguished Members, allow me at this moment to briefly highlight the performance of the economy in 2009. Although projections of GDP growth for 2009 had been revised downwards to 4.3% on account of the effects of the global financial and economic melt-down, preliminary data indicates that the economy posted a real GDP growth rate of 6.3% compared with the 5.7% recorded in 2008. Almost all key sectors of the economy recorded positive growth except for restaurants and hotels which saw negative growth due to lower tourist and business travel arrivals during the financial crisis. Annual overall inflation slowed down, reverting to single digit level of 9.9% in December 2009 from the 16.6% recorded in December 2008, and was in line with the original end-year target of no more than 10%. This outturn was attributed to the decline in both annual food and non-food inflation. In the external sector, Zambia’s external position showed remarkable improvement as reflected in the build-up of gross international reserves to 5.1 months of import cover in 2009 from 2.1 months of import cover in 2008. Zambia’s overall balance of payment position is expected to remain favourable in 2010 due to the rebound of copper prices on the international market as well as the expected increase in copper production as some mines increase production to full capacity and the resumption of production at some mines. The rebound in the international price of copper in the second half of 2009 and the return of foreign portfolio flows resulted in an appreciation of the exchange rate of the Kwacha by 4% at the end of the year. However, fiscal performance in 2009 was weak, mainly due to the global economic crisis, which reduced domestic revenues. Despite this, Government remained within the programmed domestic financing for the year. Ladies and Gentlemen, the financial sector has remained resilient despite the adverse effects of the recent global financial crisis. Currently, the Zambian financial sector is characterised by high liquidity levels, reflecting tighter lending standards in the wake of the lessons from the global financial crisis leading to marked decline in private sector lending. As a result, the demand for the relatively risk free Government securities has increased causing a decline in yield rates on Government securities. The decline in Government securities yield rates and relatively low inflation experienced since the beginning of the year should contribute to a decline in banks lending rates and thus stimulate borrowing by the private sector. Ladies and Gentlemen, the critical role the accounting profession plays in enhancing economic development cannot be over-emphasized. One of the most important role the profession plays in any organization is to provide accurate, reliable and high quality financial information which communicates an organization’s operating results, its overall health, as well as raise the transparency of its various operating activities. The other role is the audit function, both internal and external, which provides independent assurance of the information produced by accountants and also reviews the control environment in which this information is produced. In a growing economy like ours, the need for high quality financial information is very critical. Financial information provides the basis for all financial decision making at all levels of economic activity, from households to large international organizations. Remember, there is no high quality information without the work of accountants and that is one reason why accountants play such a critical role in today’s global financial system and the global economy. You provide financial information that helps businesses and governments run properly. You provide investors and creditors with reliable information for decision making. You also provide assurance services founded on integrity and independence. Distinguished Members, the vision of this country is to become a prosperous middle income country by the year 2030. In order for us to attain this vision, we need to improve the financial infrastructure in Zambia. The Government intends to achieve this through the implementation of the Financial Sector Development Plan. An improved financial infrastructure will result in efficient capital and money markets which will in turn attract foreign investment into our economy. However, in order to attract and retain foreign investment, we need to have the ability to provide investors with transparent information that will result in efficient investment decisions, higher returns and greater investor confidence. Without confidence, investors will simply find somewhere else to invest their money. High quality, investor oriented and transparent financial reporting attract both seekers and providers of capital. This is where accountants come in, to ensure the provision of reliable and transparent financial information to potential investors and other users of financial statements. Ladies and Gentlemen, I am certain that as members of ZICA you take pride in helping improve the financial sector in Zambia. This is done through standard setting. I recognize the fact that Accounting standards provide the foundation for the production of high quality financial information. I am aware that ZICA has adopted International Financial Reporting Standards (IFRS’s) in full and that all members of ZICA are obliged to ensure compliance with IFRS. However, it is unfortunate that despite ZICA adopting IFRS, it is not a legal requirement under the Securities Act, the Insurance Act, the Banking and Financial Services Act and also at the Lusaka Stock Exchange. Nonetheless, I wish to state that efforts are underway to make IFRS a mandatory requirement for financial institutions. It is important for this provision to become a legal requirement in order to enhance the credibility of financial statements that are being produced by institutions governed by the various laws. I wish to state here that as much as it is important to follow international standards, these need to be reviewed for their relevance and practical application locally. It is also important to look at their relevance to small and medium enterprises where compliance may place additional burdens on operations. Ladies and Gentlemen, as we discuss the harmonization of various laws, I would like to bring up the issue of money laundering. The Prohibition and Prevention of the Money Laundering Act (PPMLA), enacted in 2001 requires all persons, whether corporate or unincorporated, to comply with its provisions. Although the Act does not impose specific obligations on accountants, they are expected to comply with its provisions. It has been noted from the recent court cases on abuse of office and corruption that professional entities such as law and accounting firms have been used as a channel to launder some of the proceeds of crime. As we are all aware, one of the duties of accountants is to know the sources and application of the resources in their organization. Therefore I don’t think it is unfair to say that in most organisations, where money is being laundered, an accountant is involved. As we speak, the PPMLA is being reviewed, and it is expected that the amendments to PPMLA as well as the new law for the establishment of the Financial Intelligence Unit will impose some reporting requirements on accountants. To maintain the reputation of your profession, all accountants should uphold good ethical and professional standards as custodians of financial resources. There is also the need to ensure that financial matters are prudently managed in organisations for we have seen an increase in reported cases of accountants involved in unlawful practices which does not reflect well on the profession. Notwithstanding, allow me to commend ZICA for the hard work leading to the enactment of the Accountants Act in 2008. This is a positive development for the regulation of the Accountancy profession in Zambia. I note that the Act prescribes the relevant qualifications for accountants and also provides for disciplinary action against accountants found guilty of misconduct and corrupt practices. It is my sincere hope that the enactment of the Accountants Act will deter potential offenders and will also ensure that accountants found guilty of malpractice receive the appropriate punishment. Distinguished Members, I further wish to commend ZICA for the development of the local qualification, the ZICA Accountancy program which has been in existence since 2006. This is a positive achievement for ZICA as it provides affordable training to accountants. I am encouraged by the statement in your annual report that you intend to make the ZICA qualification the most preferred in the market. I urge ZICA to ensure this program is relevant not only to Zambia but to our neighbouring countries in order to provide an alternative to the costlier international professional training courses. This is a potential area of foreign exchange earnings for this country. The competitive strength of our country can only be proven by our ability to sell in the most demanding of international markets. As I conclude, let me challenge ZICA and all its members to assist in promoting efforts to improve the financial capability and financial education in Zambia. I particularly would like to urge ZICA to partner with Non-Governmental Organisations as well as the Ministry of Education in promoting financial education in schools and other institutions of learning in rural areas. This sort of collaborative approach provides an excellent model for how professionals should put their expertise to good use in local communities across the country. At this time when the world economy is at crossroad, I am sure the accountancy profession is positioned to take a leadership role in helping to steer our way out of the financial crisis, through high-quality accounting and auditing standards; through high-quality ethical standards and through an understanding and support of the growth of Small and Medium Enterprises. Ladies and Gentlemen, I thank you for your attention. | bank of zambia | 2,010 | 4 |
Remarks by Mr Caleb M Fundanga, Governor of the Bank of Zambia, at the United Nations Working group meeting on the world financial and economic crisis, New York, 3 May 2010. | Caleb M Fundanga: Measures to improve financial regulation and supervision of the financial system in Zambia Remarks by Mr Caleb M Fundanga, Governor of the Bank of Zambia, at the United Nations Working group meeting on the world financial and economic crisis, New York, 3 May 2010. * * * The Co-Chairpersons of the Ad hoc Open Ended Working Group on the World Financial and Economic Crisis Distinguished Delegates Ladies and Gentlemen It is a great honour for me to address this important meeting on the impact and ramifications of the global financial crisis on economies across the globe. I am particularly encouraged by the fact that the discussions pay particular focus on the issues of financial sector reform and how we can best ensure that the financial sector plays its rightful role in facilitating innovation, enterprise, growth and development. Chairperson, although the worst effects of the economic recession appear to be behind us, the negative effects are still being felt, particularly in the advanced economies where unemployment is likely to remain stubbornly high. According to the most recent forecasts by the IMF, the global economy is projected to record positive growth of 3.9% in 2010, after contracting by 0.8% in 2009. However, these growth rates mask significant differences in economic growth across the world, with emerging and developing countries on the whole posting much stronger growth rates than the developed or advanced economies. It is obvious that there will be need to rebalance fiscal and monetary policies in these economies once growth becomes more broad-based and entrenched to avoid a build up of inflationary pressures. As the crisis was mainly a result of weak regulatory framework and poor supervisory oversight in advanced economies, there is also need to continue undertaking measures to reform the financial systems and enhance global standards for the supervision of the financial sector. Zambia weathered the crisis relatively well, with growth in 2009 actually increasing to 6.3% from 5.7% in 2008. This growth was largely driven by increased output in the mining and quarrying, construction, agriculture, and energy sectors. Although the Zambia’s financial sector was not directly exposed to toxic assets, the financial crisis and the global recession that it triggered did impact Zambia’s macroeconomic environment. The Zambian economy suffered reversal of short term capital flows and a slowing down of foreign direct investment, which had an adverse impact on the exchange rate of the Kwacha against the major currencies. The collapse in commodity prices as global demand contracted also impacted on Zambia’s mining sector and its related support industries, leading to losses in output and employment that fed back into the deterioration in the loan book of commercial banks. Nonperforming loans in the banking sector, for example, rose from around 6% in June 2008 to 12.6% at the end of 2009. Distinguished delegates, part of the reason for the resilience of Zambia’s financial sector were the comprehensive financial sector reforms that have been systematically undertaken after the banking sector collapse in the second half of the 1990s. These reforms were promulgated under a Financial Sector Development Plan (FSDP) that was implemented to address weaknesses in the financial sector, identified in a Financial Sector Assessment Programme (FSAP) conducted by the International Monetary Fund (IMF) and the World Bank in 2002. Zambia’s reforms included the following: the increase in capital requirements for banks; consolidation of the supervision of bank and non-bank financial institutions under the Bank of Zambia; legislative reform that gave the Bank of Zambia powers to deal with failing institutions; and the promulgation of corporate governance guidelines including the conduct of outreach programmes on good corporate governance practices for the financial sector and the introduction of credit reference services. The Bank of Zambia is continuing with its work to improve the financial sector and enhance the role of the financial sector in the development of the country through the implementation of the second phase of the Financial sector Development Plan, FSDP II. The FSDP II will focus more narrowly on issues of competition within the financial sector and extending financial inclusion. However, the fallout from the crisis has brought to the fore the need to further enhance the regulatory framework by adopting and fortifying supervisory and regulatory practices which ensure prompt and effective policy responses to developments in the financial system. Ladies and Gentlemen, the introduction of credit reference services in Zambia was necessitated by the poor credit culture, which was identified as one of the weaknesses in the financial sector, under the FSDP. Bank of Zambia licensed the first ever credit reference bureau, in 2006, following the introduction of the Credit Reference Services (Licensing) Guidelines and Credit Data (Privacy Code) 2006. The substantive operations of the CRB commenced in the fourth quarter of 2008 after a Directive was issued by the Bank of Zambia on 10 December 2008 mandating all credit providers to use the services of a credit reference agency before issuing any loan and to provide credit data to a credit reference agency. However in spite of these efforts, the credit reference system still faces problems, largely relating to the coverage of sectors, as the current legislation is limited to the financial sector. In view of this, the Bank of Zambia is currently developing a comprehensive credit reference law that, amongst other things, will have jurisdiction over all credit providers and data sources and will provide for the treatment of credit data. Chairperson, allow me to share with you some of the key regulatory and supervisory issues that the Bank of Zambia is addressing with regards to the regulation of the financial system in Zambia and the need to address the supervisory challenges posed by the global financial crisis. These issues include: the adoption of a risk based supervision (RBS), enhancing the legislative framework, the determination of capital adequacy, the introduction of a deposit insurance scheme, the enhancement of our lender of last resort regime, and the enhancement of cross-border cooperation through consolidated supervision of financial institutions. Risk based supervision is a structured, forward-looking process designed to identify key risk factors to which individual banks are exposed. This approach entails closer interaction with banks and allows early identification of risks as well as close monitoring of the nature and direction of risks as they emerge. The banking industry has recorded notable rapid growth in the last ten years. This growth comes with heightened risk levels. The RBS provides robust mechanisms to ensure that banks have adequate risk management systems to mitigate risks. RBS systematically considers all key functional activities (business lines and operational areas) and, within each key functional area, evaluates the level of risk, quality of risk management, and direction of risk. The resulting risk profile of the bank, which is dynamic, will therefore change during the supervisory cycle. This paradigm shift in supervisory approaches requires a permissive legal and regulatory framework. In order to ensure timely and credible information for the effective supervision of banks and other financial institutions, the Bank of Zambia has been playing a key role in developing the Bank Supervision Application System (BSA), which is a Southern African Development Community (SADC) region initiative. The BSA is a standardized tool designed for capturing supervisory information, financial and risk analysis and provides a workflow mechanism for communicating the different aspects of the supervisory process. Distinguished delegates, the legal and regulatory framework governing the supervision of the financial sector must provide for a fast and flexible way of adapting the banking system to the constantly changing financial landscape. The legal and regulatory frameworks in Zambia comprise of the Banking and Financial Services Act, Chapter 387 of the Laws of Zambia; the Bank of Zambia Act, Chapter 360 of the Laws of Zambia; the National Payment Systems Act; the Prohibition and Prevention of Money Laundering Act; the Bank of Zambia Anti-Money Laundering Directives; and the Bank of Zambia Corporate Governance Guidelines. The speed at which changes to these regulatory frameworks can be made is a crucial element of the reform process in regulatory and supervisory arrangements as it improves policy responsiveness. A number of challenges exist in this area including the need to update some of the Statutory Instruments (SIs) in order to reflect the dynamics presently characterizing the financial markets. In some cases, new guidelines are altogether needed for regulating new products and innovations such as mobile banking, internet banking and Islamic banking. The need for quick and appropriate responses to market developments and innovations while important also need to be balanced by a well designed regulatory framework that ensures the maintenance of a stable and sound financial system. Chairperson, the stability and soundness of the financial system is in turn, heavily dependent on the adequacy of capital. It is essential for the right balance to be struck between the need for banks to hold adequate capital to absorb losses and the need to ensure that capital requirements do not unduly constrain from lending to the real economy. It is also important that banks are not so highly leveraged relative to common equity as to create incentives for excessive risk taking. The required capital ratios should therefore be viewed in the context of the high quality capital – Core Tier 1 and Tier II definitions and should exclude subordinated debt as providing relevant support. Distinguished delegates, Basel II provides a pragmatic approach to determining overall capital levels. It introduced a new approach to the definition of relative capital requirements to be held against specific asset categories. The challenge in this approach is in deciding what an optimal level of capital is especially in light of massive scale of economic losses now being suffered as a result of the banking system collapse. However, any theory of optimal capital level will have to strike a balance between the increased cost of financial intermediation which result from higher capital requirements and the benefits of the decreased probability of bank failure and economic harm which will be achieved. Recent developments have established a prima facie case for higher minimum capital requirements. The challenge will be for supervisors to manage the transition to higher capital requirements in a phased approach and take into account the need to avoid procyclical pressure on bank capital adequacy under conditions of economic downturn. Zambia has adopted Basel II for implementation although work is still on-going in this area. The enhanced approaches to capital that I have just described have the potential to significantly minimize the probability of bank failure. They may also assist in reducing the extent to which strains on bank capital and liquidity result in an impaired ability to extend credit to the real economy. But the probability of bank failure cannot be reduced to zero. The system of bank regulation and supervision therefore needs to be buttressed by arrangements for deposit insurance (for protecting depositors in the event of default) and for bank resolution (to ensure orderly wind up and avoid knock-on effects to the rest of the banking system). In this regard, an effective deposit protection scheme becomes an important aspect of the financial safety net especially in crisis times. Although Zambia did not experience bank failures during the current global crisis, work on the establishment of the deposit protection scheme is currently in progress. Quick bank resolution is also an essential element that inspires confidence in the financial system. In Zambia, for instance, work on liquidations has been going on for some time in some cases. The establishment of an effective depositor protection scheme should assist in early bank resolutions while providing protection to the most vulnerable depositors. Chairperson, although the Bank of Zambia has exercised the function of lender of last resort (LOLR) in the past during the banking crisis in the 1990s, there was no clear LOLR policy framework in place. There has been renewed concern that the economic slowdown, if prolonged, could create liquidity pressures in the banking system in Zambia. Past experiences and current global slowdown build a strong case for a clearly designed LOLR framework in which the central bank can exercise this function. The challenge in the regulatory and supervisory arrangements is that of operationalising the lender of last resort. Lender of last resort should be seen in light of its role in promoting wider public good and systemic financial stability and ultimately, the wider economic stability. It plays an important role in the economy to avoid the social cost of a bank failure. Some bank failures may lead to contagion effect on other banks which has the potential to transmit to the entire economy. Lender of last resort should be an essential element of the wider institutional framework for governments and central banks for dealing with banking crises in addition to prompt corrective action, bank resolution and deposit insurance among others. Distinguished delegates, the speed with which the crisis spread across the globe highlights the global nature of financial markets and the importance of cross border supervision. The risk posed by cross-border operations by financial institutions is clearly significant if not properly supervised. Over the years, many financial organisations worldwide have adopted more flexible and complex structures through the establishment of a wide range of subsidiaries and affiliates that are engaged in business lines different from the core business of the parent financial institution. The emergence of financial conglomerates has seen banking activities, asset management or insurance activities that previously were conducted on a stand-alone basis now being provided within one financial group. Some of these financial groups operate businesses across borders. The main economic and financial benefit which encourages the formation of such groups is the enhanced ability to achieve economies of scale and capture synergies across complementary financial services business lines. These synergies result in improved operational efficiency and effectiveness due to lower costs, reduced prices, and improved innovation in products and services. At the same time, the emergence of such groups has brought complex linkages and relationships among economic agents. Consequently, they have also necessitated a paradigm shift in supervisory approaches in order to identify, manage and monitor risks both within and across borders. Distinguished delegates, previously, supervision of cross-border banks placed significant reliance on the ultimate home country supervisor to ensure the soundness of the overall institution. This implied that other regulatory authorities could only provide input to the supervisory process in the home country. Hence, it was considered appropriate for global firms to gain the benefits of global approaches to the management of their business and had significant flexibility in the use of legal entities to book transactions and to manage liquidity globally. Therefore, the global inter-connectedness made it very difficult for individual national entities to survive group failure even though they are subsidiaries, given the huge importance of confidence factors in funding markets. The challenge is how to develop regulatory and supervisory approaches which will minimize the likelihood of cross-border failures and to reduce the severity of that impact in the event of a failure materializing. It would appear that an appropriate response would have to combine both greater coordination among supervisors and actions aimed at specifically addressing national concerns. On its part, the Bank of Zambia is currently settling Memoranda of Understanding with various central banks for effective supervision of entities with cross-border operations. This is also necessary for enhancing cooperation among the various regulatory authorities in the financial system in Zambia such as the Pensions and Insurance Authority and the Securities and Exchange Commission. Chairperson, in the wake of the financial crisis, there has been renewed interest in macroprudential supervision. In many countries or economic areas, the institutional framework for financial stability is being strengthened in the light of the lessons learnt from the crisis, and incorporates new supervisory tasks and bodies responsible for the macroprudential regulation of systemic risk and Zambia is no exception. Overall, the current crisis has revealed that microprudential supervision in many cases proved inadequate to identify, in a timely manner, the nature and size of accumulating risks and to impose appropriate remedial action; and that there is therefore, a need to strengthen both the macroprudential and microprudential supervision of the financial system. The Bank of Zambia with the help of the World Bank is currently conducting pilot tests of the World Bank developed Financial Projection Model (FPM) on a number of financial institutions. Among many other things, the FPM is a tool designed to simulate the effect of internal and external events upon financial institutions’ solvency and profitability to implement stress scenarios in a dynamic fashion. The Bank of Zambia is also developing a financial sector contingency plan to address problems of a systemic nature and enhance practical tools for effectively managing financial distress and potential systemic crisis. Chairperson, let me conclude by stating that in the wake of the global financial crisis, Governments around the world and the international community acting together, have an important opportunity to address some of the structural weaknesses in our domestic economies and in the global financial system that were laid bare by the crisis. I have already outlined the broad changes that are being considered. It is, however, important to emphasize that for the emerging and developing economies, particularly those in SSA, these measures to reform the international financial architecture need to be carefully considered to ensure that they build on the strong foundation for economic growth that has been laid over the past decade. I thank you for your attention. | bank of zambia | 2,010 | 5 |
Opening remarks by Mr Caleb M Fundanga, Governor of the Bank of Zambia, at the signing ceremony of the Memorandum of Understanding between the Bank of Zambia and the University of Zambia, Lusaka, 30 June 2010. | Caleb M Fundanga: Framework of cooperation between the Bank of Zambia and the University of Zambia Opening remarks by Mr Caleb M Fundanga, Governor of the Bank of Zambia, at the signing ceremony of the Memorandum of Understanding between the Bank of Zambia and the University of Zambia, Lusaka, 30 June 2010. * * * The Vice Chancellor, University of Zambia – Prof. Stephen Simukanga The Deputy Governor – Administration and University Council Chairperson – Dr Tukiya Kankasa-Mabula Distinguished Professors and Lecturers from UNZA Colleagues from the Bank Members of the Press Distinguished Ladies and Gentlemen; It gives me great delight, on behalf of the Bank of Zambia, to welcome you all to this important signing ceremony of the Memorandum of Understanding between the Bank of Zambia and the University of Zambia. The MoU that we are about to sign today provides a framework for the support to the Economics Department and Research activities in the Department. Ladies and Gentlemen; the Bank of Zambia continues to view the University of Zambia and the Copperbelt University as strategic partners in the economic development of Zambia. It is for this reason that the Bank has for several years now been involved in the support of various capacity building programmes at the two tertiary learning institutions. This support has taken various forms, including the following: Salary supplementation to fifteen (15) academic staff in the Department of Economics at UNZA and nineteen (19) academic staff in the School of Business at the Copperbelt University (CBU); Full sponsorship of five undergraduate students at third and fourth year level at CBU and five students at Masters Degree level at UNZA; Financial support in the acquisition of books and periodicals; Purchase of equipment such as computers and computer software. The Bank of Zambia acknowledges the various efforts being made by the University to improve its infrastructure and the delivery of quality university education and research. We are also mindful of the various funding constraints faced by the University as it expands its programmes to meet the ever increasing demand for its services. The Bank is therefore, proud to respond to the University’s call for partnership with industry and other stakeholders in order to realise its noble objectives that cannot presently be fully funded from public resources and students fees. In this regard, the Bank of Zambia has seen it fit to not only extend this support, but to also streamline and enhance it in order to better align this support with strategic objectives of both the Bank and the University. Ladies and Gentlemen; as you are aware, the Bank of Zambia has been providing financial support for the purpose of promoting scholarly and academic excellence in research and instruction at the University of Zambia. Today’s MoU is meant to extend this support for another two years commencing with the 2009/2010 academic year. In addition, the MoU aims at strengthening the framework of cooperation between the Bank of Zambia and the Economics Department of the University of Zambia. Under this agreement, the Bank has committed up to K605 million per annum in support to the Economics Department of the University of Zambia. This support will include monthly salary supplementation for 15 lecturers in the Department; scholarships to four outstanding UNZA students of Economics at Masters Degree level; acquisition of books and periodicals; research support; and the purchase of computers and software for use in research. It is the hope of the Bank that this support will help address some of the challenges facing the University, including recruitment and retention of academic staff, funding for research and the acquisition of vital equipment and software. Ladies and Gentlemen; through this support, the Bank of Zambia would like to be associated with the University’s mandate of building human capital, through delivery of quality education, and the extension of the frontiers of knowledge through research. This synergy between the Bank and the University is based on the understanding that both institutions are knowledge based. It is therefore, our belief at the Bank that this cooperation will continue to generate positive externalities not only to the two partners but to the wider community through the developmental impact of enhancing knowledge. Let me re-iterate that sustainable economic development is not possible without adequate investment in the knowledge industry. It is precisely for this reason that the nations that have attained great economic progress are also those that have invested heavily in education. Ladies and Gentlemen; in the recent years, the Bank of Zambia has been striving to strengthen its focus on economic research in order to improve the formulation and implementation of monetary policy in this dynamic economic environment. The Bank has in this regard been publishing the BoZ Reader where members of staff and external researchers are encouraged to publish articles which have a bearing to the economy in general and monetary policy in particular. The Bank in collaboration with the Centre for the Study of African Economies at Oxford University is also in the process of publishing a book on the economic prosperity in Zambia. I wish to take this opportunity to encourage all students and academic staff at UNZA to contribute to some of the forthcoming publications of the BoZ Reader. In conclusion, I wish to re-iterate that the Bank of Zambia commits to continue supporting the Economics Department and Research programmes at UNZA and hopes that the University will live up to its obligations under the framework of cooperation to be signed today. We challenge the Economics Department at UNZA through the Vice Chancellor to scale up its research activities in issues of interest to the Bank and the Zambian economy in general. For this is what this MoU entails. We also call upon other industry players in the financial sector to emulate our noble contribution in building human capital and research capacities at this important institution. This is important to ensure that our financial sector operates at the cutting edge of knowledge and innovation. I have no doubt therefore, that such investment will yield returns in the long run as knowledge is a secure investment. I thank you for your attention. | bank of zambia | 2,010 | 7 |
Opening remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Macroeconomic and Financial Management Institute of Eastern and Southern Africa MEFMI workshop on Advanced Payment System Oversight and Management, Lusaka, 12 July 2010. | Caleb M Fundanga: Advanced payment system oversight and management Opening remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Macroeconomic and Financial Management Institute of Eastern and Southern Africa (MEFMI) workshop on Advanced Payment System Oversight and Management, Lusaka, 12 July 2010. * * * The Director – Financial Sector Management at MEFMI Representatives from MEFMI Secretariat Distinguished Resource Persons Dear participants Ladies and Gentlemen It is my pleasure and honor to be here today to officiate at this important regional workshop on Advanced Payment System Oversight and Management organized by the Financial Sector Management Programme of the Macroeconomic and Financial Management Institute of Eastern and Southern Africa (MEFMI). Ladies and Gentlemen, allow me to begin by expressing my gratitude to MEFMI, for having organized this workshop that has brought together officials from the regional central banks and ministries of finance and economic planning to address and brainstorm on important aspects concerning regulation and supervision of the payment systems. I warmly welcome you all to Zambia and in particular to the City of Lusaka. In particular, I would like to welcome and thank our distinguished resource persons, some of whom are here present and others still to join us during the week. We thank you for accepting invitations to join us for this workshop and hope that your participation will enrich the deliberations of this workshop as well as the knowledge of the participants. I am aware that the quest to hold this workshop was driven by the deep conviction that a well developed and regulated payment system plays an important role in enhancing and promoting soundness in the financial system and is a catalyst for creating efficient transmission of monetary value in the economy. A well functioning and developed payment system is an essential requirement for the development of a market economy and deep financial markets. Equally important is its role in the enhancement of the conduct and transmission of monetary policy. Conversely, inefficient payment system operations can be a channel for causing distortions in the economy through inordinate delays in the monetary policy implementation and in settlement of financial transactions. This will invariably prevent the central bank from achieving its objectives of price stability and a sound financial sector. The MEFMI region still faces a lot of challenges with respect to the development and oversight of payment systems. Notable among these are: 1. Regulation of non-bank payment system providers such as mobile phone companies; 2. Regulation of innovative payment system products; 3. Ensuring the law contributes to payment system developments and operations; 4. Ensuring full utilisation of large value payment system by all stakeholders including the Government; 5. Enhancing and retaining skills in oversight of payment systems; 6. Ensuring effective cooperation between different regulatory authorities in the regulation of payment systems; 7. Maintaining and enhancing market competition and cooperation in the development and operation of payment systems; and 8. Ensuring consumer protection in payment system services. I am glad that this workshop is going to address these key issues and challenges with respect to the above and I am confident that the rich discussions you are going to hold and the lessons of experience you are going to share will not only enhance your skills but also bring out pertinent issues that require to be addressed when you go back to your home countries. Ladies and Gentlemen; let me take this opportunity to express my gratitude to the NorthWest University, South Africa, the South African Reserve Bank and the Reserve Bank of Zimbabwe for releasing their officials to share with us their knowledge and experience at this workshop. To all of you, I wish you the best and I encourage you to participate actively during the presentations and discussions. Use every opportunity to tap from the vast experiences of the resource persons during these five days. Last but not least, I wish to thank the MEFMI Secretariat for organising this important workshop and for choosing Zambia as the venue. With these remarks, Ladies and Gentlemen, I declare this workshop officially open. | bank of zambia | 2,010 | 7 |
Opening remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Prize-Giving Ceremony for Intermarket Banking Corporation VentureComp 2010 Business Plan Competition, Lusaka, 28 July 2010. | Caleb M Fundanga: Importance of entrepreneurship in Zambia’s economy Opening remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the PrizeGiving Ceremony for Intermarket Banking Corporation VentureComp 2010 Business Plan Competition, Lusaka, 28 July 2010. * * * Mr Ackim Sinkala, Acting Managing Director – Intermarket Banking Corporation Zambia Limited and Intermarket Securities Limited; Mrs Beatrice Nkanza, General Manager Lusaka Stock Exchange; Dr. Maurice Jangulo, Board Chairman Zambezi Airlines; Dr. Patrick Nkanza, Director General TEVETA; Officials from the Ministry of Science, Technology and Vocational Training; Chief Executive Officers of Financial Institutions and Companies Present; Distinguished Invited Guests; Members of the Press; Ladies and Gentlemen. It is my honour and privilege to officiate at this Prize Giving Ceremony of the VentureComp 2010, K100 Million Business Plan Competition. I was honoured at the beginning of this year to have been given the opportunity to launch this Competition. I did not hesitate to accept the invitation to officiate at this event as the subject of entrepreneurship and the deserved recognition of the entrepreneurial efforts of young men and women is very close to my heart. Distinguished Guests, let me from the onset take this opportunity to commend the sponsors of this competition, Intermarket Banking Corporation Zambia Limited, Intermarket Securities Limited, and their partners, Lusaka Stock exchange (LuSE), Zambezi Airlines and TEVETA for coming up with this excellent and important initiative. It is gratifying to note that applications were invited from all eligible students in various higher institutions of learning around the country. I have also been informed that although only four teams have been shortlisted, the response from the young entrepreneurs was overwhelming with about 75 total applications received. I am certain that the winning team will be worthy winners of the K100 Million Business Loan Sponsorship prize. Further, I have been reliably informed that the competition will become an annual event and prize money will be increased in future years, which indeed is commendable. I am certain that the award will provide a great incentive to our young men and women to be innovative and develop business ideas. The initiative will also improve the level of entrepreneurship in the country which is lacking at the moment. Mr Chairman I once again applaud you and your co-sponsors for this long term commitment to this award programme. Distinguished Ladies and Gentlemen, allow me at this moment to highlight the importance of entrepreneurship in our economy. Entrepreneurship involves developing innovative ideas, taking risk and managing the business in a sound manner. In these turbulent times and with an increasingly competitive global market, it is vital for a country like ours to have a good entrepreneurial base which should contribute to wealth creation and to the country’s economic development. The need for more Zambians to own successful businesses and compliment foreign investments in our country cannot be over-emphasised. It is imperative that a lot more local businesses engage in economic sectors like mining, manufacturing, construction and tourism in order to effectively contribute to the country’s economic development. This can only be possible through innovation and risk taking by indigenous companies with the potential to grow and succeed not only in Zambia but also in international markets. Moreover, entrepreneurship can play a central role in assisting our country meet the various challenges that it faces today. For instance, entrepreneurship can assist in addressing the challenges arising from: Low levels of employment; Social exclusion; Low levels of competitive products and services in the economy; and Urbanisation and rural poverty. In order to minimize the adverse effects that arise from these challenges, there is a need to both sustain a high level of entrepreneurial activity in general and to maximise the number of new businesses that are innovative, and that aspire to, and are capable of achieving significant growth. However, if we are to build a much greater number of competitive and innovative businesses in Zambia, then we will need to see many new businesses being created now and in the years ahead. We need to ensure that the culture of entrepreneurship becomes embedded in all our people at a very young age. The education and training sector will play a critical role both in developing entrepreneurial mindsets and in equipping future entrepreneurs with the skills necessary to successfully position new enterprises and manage their development and growth. Ladies and Gentlemen, it is a fact that a thriving entrepreneurial culture has the potential to make a substantial contribution to our economic and social development and to achieving a balanced economic growth. The key therefore, is for businesses to be innovative and competitive at all times. To achieve this we need to develop outstanding young men and women who can be leaders in their fields and who are ambitious with a mindset to be successful and to compete at the highest level. Mr Chairman, I have no doubt that awards like yours can be hugely influential in fuelling the entrepreneurial urge and in inspiring youths to emulate the achievements of those whose enterprising dreams will be rewarded this evening. The award will also be key in raising public awareness on the need for continuous innovation among our youths. As you are aware, the engine of the fast growing economies such as China and India is the innovation and creativity of the young entrepreneurs in those economies. It is incumbent upon us therefore to also encourage our youths to take up their rightful place and contribute to the country’s development. Furthermore, banks and Financial Institutions in Zambia have in the past lamented the low levels of banking and economic knowledge among graduates from tertiary institutions as well as the borrowing public in general. It is therefore gratifying to note that this evening, we celebrate and showcase the depth of the entrepreneurial talent that is flourishing in our schools of higher learning. It is also heartening to see these young men and women putting up high quality business proposals of a diverse range of projects. This speaks well for the inventiveness of our learning institutions and is a very welcome development indeed. Ladies and Gentlemen, this initiative represents a major milestone in developing linkages between the industry and tertiary institutions which is key in bridging the gap between expectations of employers and those of the labour force. It is also testimony that we have financial institutions and business entities that are willing and committed to promoting private entrepreneurship among young people in our country at the level of start-up businesses. Once again, I commend the sponsors and their partners for this important initiative. I am certain that your efforts will go a long way in contributing to the building of an entrepreneurial society in Zambia. This is a task not only for you but for everybody. I wish to urge in particular, the education system in Zambia to enhance their efforts in promoting positive attitudes towards entrepreneurship in the institutions of higher learning. I further call on the media to play its rightful role in educating the masses and the youth in particular on the importance of entrepreneurship and indeed to give more coverage to Zambians who have succeeded in entrepreneurship in order for our youths to be motivated. I also wish to urge other banks and financial institutions to emulate Intermarket Banking Corporation to develop such well meaning initiatives for this is indeed good Corporate Social Responsibility. I am sure that there are a number of entrepreneurs all over Zambia who are in dire need of that seed capital as well as the initial push to realize their dreams. I have in mind here the very innovative entrepreneurs in Mutendere, Kalingalinga, Garden Compound, Mandevu and several other industrial clusters in our country who are trying to do their best but lack the necessary support in form of finance and education. As I conclude, I wish all the teams that have been shortlisted tonight continued success in future. Unfortunately, there can be only one winner of the overall award but each nominee is already a winner and should feel proud of their nomination and deserving of recognition and our congratulations. I hope that all of you whether you win the award or not will develop your businesses ideas into a reality in future. To the winners, I heartily congratulate you and urge you to make the best use of the K100 Million Prize. Being the first winners of this competition also carries with it the responsibility for you to implement your business plan successfully and set a high standard for subsequent winners in the years to come. I thank you for your attention! | bank of zambia | 2,010 | 8 |
Keynote address by Dr Caleb Fundanga, Governor of the Bank of Zambia, at the Zambia Institute of Chartered Accountants Annual Business Conference on "Change and the Paradigm Shift in the Accounting Profession", Livingstone, 6 August 2010. | Caleb Fundanga: The cost of capital – wither the Zambian financial markets? Keynote address by Dr Caleb Fundanga, Governor of the Bank of Zambia, at the Zambia Institute of Chartered Accountants Annual Business Conference on “Change and the Paradigm Shift in the Accounting Profession”, Livingstone, 6 August 2010. * * * The President of the Zambia Institute of Chartered Accountants; Mr Chintu Mulendema The Chief Executive of the Zambia Institute of Chartered Accountants; Mr Hapenga Kabeta Distinguished members of the Eastern, Central and Southern African Federation of Accountants Members of the Zambia Institute of Chartered Accountants Members of the Press Distinguished Guests Ladies and Gentlemen The theme for this symposium portends an important aspect of our daily lives, either at individual or corporate level. We are all, one way or the other, affected by developments in our financial markets. The role that finance plays in an economy is certainly an important one and you do not need to go far back in history for you to appreciate that role. You only need to make reference to the recent financial crises to appreciate the potency that finance has on economic activities. Chairperson, your choice of this topic therefore could not have been more appropriate. This topic is also timely given the current challenges that face many countries in the aftermath of the recent financial crisis, some of which seem to be just unfolding in some European countries. As you know, the crisis have arguably provided provocative questions regarding the management of financial markets, to which answers are now being actively sought. Ladies and Gentlemen, financial markets provide the liquidity necessary to facilitate transactions in assets. By pooling resources from a myriad of savers, financial markets play a critical role in directing resources to profitable investment projects. The ability of financial markets to effectively contribute to economic development depends on the availability of affordable capital and its efficient allocation in the economy. For this reason, affordability of capital is an important input in any economy’s progress. But the relevant question then is “How Can We Make the Cost of Capital Affordable?” Distinguished Delegates, this question cannot be adequately answered without putting it in some historical context. Most of you will recollect that two decades ago, the Zambian Government embarked on an ambitious financial liberalisation programme and dismantled many forms of administrative controls, in general, to improve the efficiency of our economy. The expectation from this policy shift was that the economy would score efficiency gains primarily arising from increased competition in the financial system. Two decades on, it would be hard to disagree that our financial system has certainly faced increased competition. Whereas the number of commercial banks at the end of the 1990s was 14 after the failure of some insolvent banks, Zambia now boasts of 18 commercial banks who in aggregate have a total of 263 branches. In the non-bank financial subsector, growth of nonbank financial institutions offering bank-like products has also tremendously increased. As at end June 2010 there were 24 registered microfinance institutions while the number of leasing firms also increased to 12 over the years. Ladies and Gentlemen, apart from increasing the number of financial service providers, we have also scored some successes in the availability of credit to Zambians. In the period prior to the 2008 global financial crisis, the economy was experiencing not only phenomenal growth in credit availability but also a changing pattern in the distribution of credit. Annual growth in credit peaked and averaged 131% between 2000 and 2008 before succumbing to the adverse effects of the global economic crisis. With regard to the direction of credit, it is heartening to note that bank loans, which have been largely a preserve of corporate businesses for a long time, are finally within reach of our many working Zambian individuals. Ladies and Gentlemen, the flow of credit to individual workers has literally exploded in recent years. You may wish to know that personal loans, which stood at a paltry 6% of total bank loans at the turn of this decade now account for 26%. You may also remember the aggressive manner in which commercial banks rolled out their loan products in the period prior to the 2008 global financial crisis. Although the degree of aggression may have somewhat subsided in the aftermath of this crisis, banks are still extending loans to persons they assess as creditworthy. Outside the banking system, credit availability by non-bank financial institutions has also increased in many forms with annual growth in direct loans disbursed by microfinance institutions and leasing finance institutions showing a significant rise. Chairperson, although these developments are encouraging and commendable, I do not think we should be fully satisfied with them. It is not enough to merely increase the number of financial institutions, nor is it enough to concentrate on building consumer loan portfolios to salaried workers only. In my view, the real gains should arise not only from increased accessibility to financial services by more of our people, but also the cost at which such accessibility is made possible. I am sure you will readily concur with me that access to finance in Zambia is still relatively low at 37.3% as at end July 2009. This is hampered in part by the continued high cost of finance and the limited financing options available to the larger part of the Zambian business sector, particularly the small and medium enterprises (SMEs). One can attribute this state of affairs to several factors which broadly are influenced by the macroeconomic environment as well as micro-structure and practices of our financial system. Concerning the macroeconomic environment, most of you will remember the deadly combination of high inflation rates and low or negative growth that characterised our economy from the mid-1980s way into the 2000s. Following the high levels of inflation, suppliers of finance inevitably sought to obliterate negative real returns on their investments by raising interest rates to levels of inflation and in many instances above. Furthermore, the low levels of economic growth exacerbated the adverse perception of borrower risks in the economy such that suppliers of finance only concentrated on servicing their existing small blue-chip customer base that survived the harsh economic environment. This environment, Ladies and Gentlemen, has played a very critical role in cementing the high cost of finance. At a micro-structural level, a poor credit culture is also another venomous factor that has had its own share of supporting the high cost of credit. Bad borrowers, who regularly borrow from several institutions with little or no intention to repay their loans, have also been cited as one reason for commercial banks’ relatively high non-performing loans, which in turn fuel high interest rates. Non-repayment of loans does nothing but muddying the waters for even good borrowers with profitable projects, and in order to stay afloat banks have responded by maintaining their loan rates high. Ladies and Gentlemen, in recognition of the shortcomings in the functioning of financial markets and the obtaining high cost of finance, the Government has instituted policy measures aimed at correcting imbalances in the economy and restoring macroeconomic stability. The benefits of these measures abound. For example, the fiscal deficit has been constrained to within the allowable limits of below 3% of GDP. Lower fiscal deficit coupled with prudent monetary policy have contributed to current low and stable inflation rate. As you are aware, annual inflation stood at 9.9% at end-December 2009 and further declined to close at 8.2% at end-July 2010. The growth in the economy has also been robust, underpinning the sustainability of policy reforms. Real economic growth has averaged above 5% for most part of the past decade. Concern has also been raised that Government borrowing competes with the private sector for scarce funds thereby pushing up interest rates and perpetuating the high cost of finance. However, in recent years, the Government has scaled down its domestic borrowing requirement in order to free resources for the private sector. On the other hand, due to banks appetite for risk free debt instruments, competition for government securities has intensified exerting a downward pressure on yield rates. Chairperson, these achievements attest to the importance Government attaches to reviving this economy and making Zambia a middle income country by the year 2030. Distinguished Ladies and Gentlemen, part of the reason financial intermediation has been limited has been because of the inadequate supporting financial and legal infrastructure. A well developed financial infrastructure is essential for fostering investor participation and expanded access to financial services. Accordingly, since 2004, the Government has been implementing the Financial Sector Development Plan (FSDP) with a view to improving the functioning of financial markets and increasing accessibility to financial services. During the initial phase of the FSDP, numerous structural impediments to financial inclusiveness were identified and some measures have been instituted to correct them. The second phase of the FSDP is currently underway and focuses on enhancing the competitiveness of the financial services industry. It also focuses on establishing secondary trading of Government securities in an effort to enhance liquidity and price formation in the debt market. Without the liquidity provided by the secondary market, the primary or new issues market would be seriously hampered in its function of helping productive entities acquire new capital at affordable price. These measures are expected to stimulate development of the capital and money markets necessary for attracting long-term financing in the economy. Ladies and Gentlemen, in order to improve risk assessment of the credit worthiness of Zambian borrowers, the Government also came up with relevant legal provisions for establishing the Credit Reference Bureau (CRB). I am pleased to report that the CRB is now operational and compilation of the database on borrowers has commenced. However, the progress of collating credit information on the state of the clients’ financial status has been rather slow. I wish to take this opportunity to once again appeal to commercial banks and other financial service providers to expedite the process of building the data base on the borrowers’ credit profile. All stakeholders stand to benefit from a rich database as credit providers will have a good basis to adequately assess the credit worthiness of their existing and potential customers with a view to providing properly priced products and services. Chairperson, the Government has also created the Citizens Economic Empowerment Commission (CEEC) in order to enable small businesses with viable investment projects have access to finance. I would personally like to see an increased flow of credit to our SMEs which, as many of you know, have been routinely found to be a major source of growth in any market economy. This is more so as the larger part of our productive population, particularly those in the informal sector, is in fact employed in one way or the other in these SMEs. It is therefore strategic for us in the financial advisory arena to support our brothers and sisters who run these SMEs. By ensuring that credit flows in that direction, we can then be assured that more and more of our people who are engaged in SMEs will certainly have access to financial services like everybody else. In the process, growth generated from the SMEs can sustainably offer the much needed respite from mineral dependency. Ladies and Gentlemen, for Government initiatives to be effective there is need to integrate them into the mainstream financial system. In this regard, financial reforms must continue to evolve and be dynamic in order to address the main challenges still facing the Zambian financial markets. Whilst the Government should take a leading role in creating an enabling environment and putting in place an effective regulatory framework, the financial services industry, to which you all here belong, can also make a significant contribution to the reduction in the cost of capital. I therefore wish to encourage you, through this platform, to provide accurate, reliable and high quality financial information on all business activities. The availability of firm level financial information will assist financial institutions in making informed decisions on granting capital to firms. This would in turn lead to a reduction in the level of risk premium loaded on the loan rates. Ladies and Gentlemen, allow me to conclude by stating that Zambia is a country in urgent need of investment. However, the high cost of finance has hampered the increase in investment. Therefore provision of appropriately priced financing and policy incentives to our business firms are important triggers to investment opportunities and increased productivity. The recent survey by Government and its cooperating partners on the cost of doing business has highlighted the need to ignite the SMEs by allowing them to come out of informality and contribute to job creation and poverty reduction. Although there are still many challenges remaining, I am particularly encouraged by the increasing number of financial service providers in the Zambian economy. This is important for competition. As competition intensifies, banks and other financial institutions would start to reposition themselves by lowering the cost of finance. On the policy front, the central bank and Government in general will continue to pursue appropriate policies that promote financial sector growth so as to enable them to reduce the cost of financial intermediation and improve the delivery of high quality financial services. On its part the Government contributes to reducing the cost of capital through lower deficit spending. This frees resources for private sector borrowing. Chairperson, I wish to strongly encourage the accounting profession to join hands with the central bank and other Government organs in the task of reducing the cost of doing business. In answering the question: The Cost of Capital – Wither the Zambian Financial Markets? – I would say that Zambia has made significant achievements in making the financial markets as properly functioning as possible. In its current state, the banking system, being the dominant player in the financial sector, should embrace competition and offer products and services that can spun growth of the entire economy. The capital market has the challenging task of mobilising small number of participants and limited range of long-term investment products. Despite these challenges I am optimistic that working together, we can reduce the cost of finance in Zambia. The Bank of Zambia will continue to provide the required leadership and act as the catalyst for the emergence of viable and responsible markets to serve the interests of all investors. Ladies and Gentlemen, I wish you success in the deliberations of this conference and in the rest of your endeavours for 2010. I thank you for your attention. | bank of zambia | 2,010 | 8 |
Opening speech by Dr Denny H Kalyalya, Deputy Governor of the Bank of Zambia, at the Opening of the High Performance Leadership Workshop, Lusaka, 9 August 2010. | Denny H Kalyalya: High performance leadership Opening speech by Dr Denny H Kalyalya, Deputy Governor of the Bank of Zambia, at the Opening of the High Performance Leadership Workshop, Lusaka, 9 August 2010. * * * Chairperson Workshop facilitators from MCA International Directors and Assistant Directors Other Participants Ladies and gentlemen On behalf of Bank of Zambia Senior Management and indeed on my own behalf, I wish to welcome you all to this important workshop, on High Performance Leadership, organized by our Human Resources Department in conjunction with MCA International. I commend the Human Resources Department for taking the initiative to organise this workshop, which is intended to facilitate exchange of information and views on appropriate leadership attributes to help us enhance our performance as leaders in our respective positions. Ladies and gentlemen, as you are aware, our key role as a central bank is to deliver low and stable prices and maintain financial system stability. In spite of the global economic downturn, our country is enjoying relative economic stability, with good prospects for the future following the recent and on-going significant economic transformation of our economy. Due to implementation of appropriate macroeconomic policies: i. The country has registered positive real GDP growth for the past 10 years and over the last five years, real GDP growth rate has averaged 6% annually; ii. Inflation and exchange rates developments have also been favourable. In 2006, a single digit inflation level was attained. Although inflation rose to double digit levels at the end of 2008 owing to the effects of the global economic crisis, we have since seen it return to single digit levels; iii. The financial sector has also recorded tremendous growth since the commencement of liberal economic and financial policies in the early 1990s; and iv. Equally, positive developments have been registered in the payment systems. I must caution, though. that sustaining macroeconomic stability remains a key challenge in the face of limited resources, infrastructure and financial inclusion. Ladies and gentlemen, as you participate in this workshop, allow me to underscore the importance, we in Senior Management attach to capacity building programmes for all Bank employees. I am reliably informed that during the workshop you will cover a number of important topics including the following: i. Self awareness; ii. Time management; iii. Action or goals required to achieve a vision; iv. Emotional intelligence and values; v. Power to take action; and vi. Ability to manage direction successfully. I am fully aware that some of the topics that you will be dealing with may not be entirely new to you, but I firmly believe that they may be necessary for purposes of reinforcing what you already know. You are all therefore implored to take keen interest in all the topics if you are to realise the full benefit of the workshop. Chairperson, there can be no true development in our Bank without good and effective leadership. Leadership is required for us to achieve our objectives. We live in a dynamic world which calls for good leadership dedicated to hardwork, daily learning , fast thinking and acting swiftly and prudently at all times. Ladies and gentlemen, you will recall that not too long ago, we were all involved in the review of the Bank’s strategic plan and came up with the 2009–2012 Strategic Plan. In order to fully implement the goals and objectives of our strategic plan we need to enhance our leadership skills. It is against this background that this workshop was organised. Our desire is to constantly upgrade our leadership skills for the attainment of our goals and objectives even in the face of daunting challenges. In conclusion, I wish to urge you to actively participate and take a keen interest in the deliberations of this workshop. It is our expectation that you will have an opportunity to carry out an appraisal of your individual leadership style and refine it in order to impact positively on policy and the way the Bank operates. With these few remarks, it is my pleasure to declare the workshop officially open and to wish you all fruitful deliberations. I thank you! | bank of zambia | 2,010 | 8 |
Opening remarks by Dr Tukiya Kankasa-Mabula, Deputy Governor of the Bank of Zambia, at the Stakeholder's Workshop on the Draft Bank of Zambia Act, Lusaka, 21 September 2010. | Tukiya Kankasa-Mabula: Stakeholder’s workshop on the draft Bank of Zambia Act Opening remarks by Dr Tukiya Kankasa-Mabula, Deputy Governor of the Bank of Zambia, at the Stakeholder’s Workshop on the Draft Bank of Zambia Act, Lusaka, 21 September 2010. * * * Chief Executive Officers and Representatives of Stakeholder Institutions; Distinguished Invited Guests; Directors and Staff of the Bank of Zambia; Members of the Press; Ladies and Gentlemen. On behalf of the Bank of Zambia, and indeed on my own behalf, I welcome you to this workshop which is entitled “the Stakeholder’s Workshop on the Draft Bank of Zambia Act”. As the name rightly suggests, it is a workshop facilitating the meeting of minds of key stakeholders affected by the Bank of Zambia Act. On the one hand we have those administering the Act, the Bank of Zambia representatives and on the other hand those whose operations stand to be affected by the administration of the Act, the Financial Service Providers. We have also cast the net wide to include other key stakeholders such as Government ministries, other regulatory entities and professional bodies representing lawyers, accountants and economists. The Bank of Zambia is charged with the responsibility of formulating and implementing monetary and supervisory policies that achieve and maintain price stability and promote financial system stability in the Republic of Zambia. To give you a brief background on the central bank legislation, since its inception in 1964 the Bank has operated under 3 different Bank of Zambia Acts; the BoZ Act of 1965, the BoZ Act of 1985 and the current BoZ Act of 1996. Each of these Acts has responded to the era of its time. For example, the Acts of 1965 and 1985 were characterised by high Government involvement in the operations of the Bank. The Bank administered exchange control regulations. It also determined and regulated the frequency and rates of fees, commissions and interest rates etc charged by financial institutions. The economic reforms that swept the country in the 1990’s saw the ushering in of the current BoZ Act of 1996 which supported the Government’s free market policies. The Bank’s mandate was made clearer, exchange control regulations were suspended and the Bank’s regulation of interest rates etc was removed. There was also improved transparency and accountability. Since the enactment of the BoZ Act of 1996 two issues have precipitated the need to have the Act reviewed again; 1. In 2002, the IMF and the World Bank conducted a joint assessment of Zambia’s financial sector under the Financial Sector Assessment Programme (FSAP). The result of this assessment raised awareness of various weaknesses in our financial system which needed to be addressed. For this purposes, the Government approved the establishment of the Financial Sector Development Plan (FSDP) in 2004 to address these weaknesses and implement recommendations. One of the recommendations adopted was the need to modernise and harmonise financial sector legislation. This included the current Bank of Zambia Act. 2. Secondly under Southern African Development Community (SADC), the SADC Committee for Central Bank Governors (CCBG) was tasked to develop harmonised Encouraged by these two events, the Bank of Zambia embarked on a process of reforming and modernising its legislation. In doing so we relied heavily on the provisions of the Model Law but were mindful that these had to relate to our local circumstances. This exercise has resulted in a “home grown” draft Bank of Zambia Act which is the subject of this workshop. We are pleased to report that the draft has incorporated principles of international best practice. Some of the salient features of the Act, as can be read in the Consultative Paper prepared for this workshop are: provisions to strengthen the legal basis, ownership and structure of Bank of Zambia as a modern central bank, as well as its primary objective; provisions relating to adequate power and independence; provisions relating to all aspects of the relationship between the Bank and Government structures; institutional arrangements of the Bank including the appointment of governors, directors and auditors, internal budgets, reporting requirements, preservation of confidentiality and handling of possible offences; adequate mechanisms for good governance and security of tenure for Governors; measures to better manage and application of monetary policies, including the role of lender-of-last-resort, interest rate policies, exchange rate policies and Bank of Zambia’s involvement in money and foreign exchange markets; creation of a Monetary Policy Committee; and accountability to Government, Parliament and the Public. By tabling this draft Act before you the Stakeholders, the Bank of Zambia wants to maximise its consultative process by taking into account your views on this layman’s draft. We encourage constructive debate and assure you that your views will be taken into account before the draft is transmitted to our parent ministry, the Ministry of Finance and National Planning. The Ministry is responsible for initiating the legislative process that shall see this layman’s draft transformed into a Bill and tabled before Parliament for debate. Therefore, I call upon all participants to openly debate this draft Act and share opinions which the Bank can benefit from in its effort to develop a comprehensive law. With these words, I declare this Stakeholders Workshop open and wish you a fruitful debate. I thank you. | bank of zambia | 2,010 | 10 |
Welcome remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Financial Sector Development Plan FSDP National Financial Education Strategy Consultative Workshop, Lusaka, 20 October 2010. | Caleb M Fundanga: The Financial Sector Development Plan Welcome remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Financial Sector Development Plan (FSDP) National Financial Education Strategy Consultative Workshop, Lusaka, 20 October 2010. * * * The Guest of Honour, Honourable Situmbeko Musokotwane, Minister of Finance and National Planning M.P.; The FSDP Steering Committee Chairman & Secretary to the Treasury, Mr. Likolo Ndalamei; Distinguished Excellencies; Co-operating partners; Chief Executive Officers and Representatives from Banks and Non-bank Financial Institutions; FSDP Working Group Chairpersons and Vice Chairpersons; Distinguished Invited Guests; Members of the Press; Ladies and Gentlemen. It gives me great pleasure, on behalf of the Bank of Zambia, to welcome you all to the Financial Sector Development Plan (FSDP) National Financial Education Stakeholders’ Consultative Workshop. Honourable Minister, this very important workshop comes at the time when the FSDP is gearing up to implement many of its activities under phase II which the Government approved earlier this year. As you are aware, one of the activities identified under the FSDP II is the development of a national financial education strategy for Zambia. Let me hasten to say, financial education needs in Zambia are many and varied. They stem from inadequate understanding, by a good proportion of the population, of basic financial terms and concepts on the one hand, and a lack of knowledge of financial products and services that are increasingly available, on the other. At the moment, there is no structured response to address the financial education needs in Zambia. There are currently some financial educational programmes being conducted by financial institutions, including the Bank of Zambia, but these are generally limited in scope and are not being implemented in a coordinated manner. These un-coordinated initiatives leave gaps that can properly be addressed through the development and implementation of a cohesive financial education strategy. Ladies and gentlemen, with this realization, the Bank of Zambia, with financial assistance from the Financial Education Fund under the United Kingdom Department For International Development (DFID), is taking the leadership role in identifying and developing a national financial education strategy that will be cohesive for the country. As the formulation of both the first and second phases of the FSDP was done through a national stakeholder consultative process, we have taken a similar approach in the development of our national strategy on financial literacy. The FSDP process has already built a wide network of stakeholders, and a platform of institutional and individual membership through its working groups and committees which can take this agenda forward. We believe that the multi-stakeholder consultative process is a critical component of the strategy. Distinguished Guests, let me give you a few examples of how the consultative process has shaped the success of financial literacy strategies in other countries. In the United Kingdom, the country’s national strategy is led by the Financial Services Authority. The implementation of this strategy is funded through levies on the financial services industry and through partnership programmes with a range of stakeholders, including financial services providers. There appears to have been little contestation of the strategy, with broad support from the industry, the Treasury and other stakeholders. In South Africa, the Financial Services Board (FSB), the regulator for non-bank, non-credit financial services, has developed and championed two national strategies; a strategy developed in 2001 and a revised version in 2008. The 2001 strategy received limited support from stakeholders and the FSB revised it in 2008. However, the revised strategy did not receive much support and is currently under review. Contestation of the South African strategies arose mainly from the fact that the FSB is not the regulator for the banking sector, and banks were against having their activities regulated through a non-bank regulator. Contestation also came from civil society organizations and other regulators, in particular, the credit regulator. Ghana has had an approved strategy for financial literacy and consumer education since January 2009. In the first attempt, largely consultant driven, it appears there was insufficient stakeholder buy-in. However, in the second process which was driven through the Ghana Micro-Finance Institutions network, there appears to have been sufficient stakeholder buy-in, and in due course, the Ministry of Finance accepted responsibility for the strategy and has been tasked with its implementation. I am informed that there is a resource person from Ghana who will be able to shed more light on this matter. In New Zealand, the development of the financial literacy strategy was led by the Retirement Commission which was mandated by a broader group at a symposium on financial literacy. There appears to have been no contestation by other regulators, possibly because there was high level involvement. The examples I have outlined above indicate how successful or otherwise the strategy development process can be. However, a common feature for successful strategy development among all the above processes is the multi-partner consultative process. Mr. Chairman, in recognising the critical role played by various stakeholders, the Bank of Zambia believes that a multi-partner stakeholder process is the most appropriate for Zambia, as it would enable greater mobilization of stakeholders and resources for the promotion of financial literacy in the country. The Bank of Zambia, will therefore, provide the initial leadership but it will be critical for all stakeholders to support, and buy-in into the strategy development process. Ladies and Gentlemen, the tremendous support of the various stakeholders to the agenda of the FSDP cannot go un-noticed. The technical and financial support provided by a number of our development partners including the Swedish Government, the Finnish Government, the World Bank, IMF, DFID, the United States Treasury and First Initiative, and now the Financial Education Fund have gone a long way in slowly making this vision a reality. The Bank of Zambia and the Government are, therefore, most grateful to our cooperating partners for helping us build capacity in our financial sector. Honourable Minister, it is also our view that the FSDP provides a unique opportunity through its structures, operating on the principle of private-public partnership, to take responsibility for overseeing the development of the financial education strategy for Zambia. One of the key issues that this partnership should help address is achieving consensus on resource requirements for implementing financial education programmes and agreeing suitable funding models that can generate a stream of resources to support sustained provision of financial education over the long-term. Ladies and Gentlemen, It is now my pleasure to call upon the Guest of Honour, to give us his key note address and to officially open this workshop. Honourable Minister Sir. | bank of zambia | 2,010 | 10 |
Opening remarks by Mr Caleb M Fundanga, Governor of the Bank of Zambia, at the Celpay 2010 Mobile Payments Conference, Lusaka, 27 October 2010. | Caleb M Fundanga: Setting new standards for cellphone banking Opening remarks by Mr Caleb M Fundanga, Governor of the Bank of Zambia, at the Celpay 2010 Mobile Payments Conference, Lusaka, 27 October 2010. * * * The Chief Executive Officer Celpay International BV The Managing Director – Zain Zambia Limited Managing Director, Celpay Zambia Ltd, Mr Miyanda Mulambo The Conference Chairperson, Mr Maxwell Banda Representatives of Commercial Banks and Financial Institutions present Representatives of International Organizations present Representatives of Zambian business associations Distinguished invited participants Members of the Press Ladies and Gentlemen, It is an honour and privilege for me to officiate at the 2010 Mobile Payments Conference. This year’s conference follows the success of the inaugural 2009 conference and it is therefore my earnest anticipation that as in 2009, you will find the 2010 conference productive and beneficial. The conference provides an excellent opportunity for the exchange of views and sharing of ideas on how to continuously improve the functioning of our financial systems against the backdrop of the global financial turmoil. Mr Chairman, Allow me to begin by commending Celpay Zambia Limited, for making the mobile banking conference an annual event. I hope that the Conference will provide a forum for long-term collaboration in the area of Mobile banking to provide sustainable banking solutions to our people. The Bank of Zambia applauds this initiative which is collaborative and consultative. It is only through such collaboration and consultation involving key stakeholders that we are able to improve our local situations as we seek to have a stable macroeconomic environment and an inclusive financial system. These are preconditions for achieving economic development and accordingly, one of the principal tenets of economic development is access to financial services. in this regard, a national payment systems development has a fundamental role to play to enhance access. Chairperson, I have noted that the theme for this year’s conference, “Setting New Standards for Cellphone Banking” is very fitting for Zambia as we face the challenge of ensuring that the majority of our adult population has access to formal financial services. As you may be aware, a large component of the work being undertaken under the Financial Sector Development Plan (FSDP) and the National Payment Systems Vision and Strategy 2007–2011 is focused on improving financial access and contributing to the establishment of inclusive financial markets in general. The recent Finscope Survey revealed that only 37.3% of the adult population have access to formal financial services leaving 62.7% of adult population financially excluded. Although significant strides have been made to improve financial access and introduce more convenient services, more work needs to be done. Ladies and Gentlemen, this state of affairs hinders people’s ability to establish financial transactions. Effectively, lack of financial access stifles entrepreneurship and holds back the country’s economic growth. For instance, as at June 2010, there were only 258 bank branches and agencies in the whole country. In most cases, these branches or outlets are located in urban centres, with rural areas having few if any branches. Conversely as at June 2010 the three mobile phone operating networks in Zambia had a total of about 4.6 million subscribers. Distinguished participants, this situation grants us an opportunity to develop innovative approaches of extending financial services. It will no doubt involve remodelling of traditional products, service delivery channels and regulatory frameworks. It is important that all possible alternatives are critically examined for viability, safety and efficiency. Some of the alternatives that need urgent examination include bank partnerships with non-bank agents to provide wider distribution outlets for payments and other financial services, and leveraging new technologies such as a common national switch to extend financial services. Mr Chairman, the Mobile Money Transfer has the potential to act as the fulcrum of branchless banking, which allows provision of transactional banking services without the need of a “brick-and-mortar” branch. Individuals are allowed to remotely access cash using different technologies, which may include automated teller machines, point of sale devices, mobile phones, payment cards or other smart technologies. To ensure that payment service providers take full advantage of the benefits that come with implementation of a Mobile Money Transfer, they must develop and embrace new business models. These models may be built around the existing large financial flows such as remittances, salary and wage benefits, pensions and other government social benefits transfer system. Ladies and Gentlemen, although Mobile Money Transfer provides a solid platform upon which to anchor expansion in the coverage of financial services, this goal will not be realised unless all stakeholders participate and play their respective roles effectively. Accordingly, banks and other payment system businesses need to utilise this infrastructure to the fullest extent possible by ensuring that various products are developed to extend financial services coverage. At the same time, households and businesses need to change their attitude towards non-cash payment methods. It therefore goes without saying that financial education will be critical in shifting public attitudes and ensuring that the non-cash payment methods are widely utilised by the target market. In this regard, I am pleased to inform you that the FSDP has prioritised financial education so as to increase the level of financial literacy and awareness of alternative payment methods. I would like to urge all financial service providers to not only take advantage of this initiative but also to design their own programmes to sensitise their customers of the innovative products they offer or plan to offer which promote financial inclusion. Furthermore, as Bank of Zambia we welcome the innovations by the banking sector and other financial service providers aimed at enhancing financial inclusion. However, it is our responsibility to ensure that these services are provided in a safe and efficient manner. In this regard, the Bank of Zambia reviews these banking products before their introduction to ensure that they comply with the existing prudential and statutory financial sector requirements. In particular, the Central Bank’s review process focuses on adherence to Risk Management Guidelines and the Anti-Money Laundering Regulations as well as Prudential Guidelines that detail minimum, “Know Your Customer” requirements that financial institutions should adhere to. The overarching objective of all this is to ensure that our financial system is safe sound and stable. In a nutshell, there is an existing supervisory framework to ensure the safety of mobile banking solutions. This framework will continue to be reviewed in line with the changes in the mobile banking space. As you may be aware, some of these innovations may require collaboration with the regulators in the telecommunication sector. As such it is our intention to work closely with the Zambia Information and Communication Technology Authority in promoting safe and sound mobile banking services. Mr Chairman, it is also worth noting that since the last Mobile Banking Conference in 2009, a number of positive developments have occurred in the telecommunication sector. For instance the partial privatization of the Zambia Telecommunications Company (ZAMTEL) will result in intensified competition in the sector. This will no doubt lead to better quality service for the consumer. Further, following the liberalization of the International Gateway, we have already seen mobile service companies reducing their rates significantly. This, coupled with the now affordable cell phone handsets, will enhance access to mobile phone services and an opportunity for many of our people to be financially served. Finally, Ladies and Gentlemen, given the innovations around mobile banking and its attendant challenges, it is our expectation that this workshop will encourage dialogue between different market players in Zambia and within the region. This Conference provides an opportunity for such dialogue and I am glad that it takes cognizance of a dynamic market environment, paying special attention to innovation that may have significant macroeconomic benefits to all involved. We are therefore keen to draw on the policy debate arising from this Conference to move financial services in Zambia to new frontiers. As Bank of Zambia, we will play a catalytic role and facilitate private sector led developmental initiatives. I thank you. | bank of zambia | 2,010 | 11 |
Presented by Dr Caleb M Fundanga, Governor of the Bank of Zambia, Lusaka, 8 November 2010. | Caleb M Fundanga: Third quarter 2010 media briefing Presented by Dr Caleb M Fundanga, Governor of the Bank of Zambia, Lusaka, 8 November 2010. * * * Executive summary This brief examines monetary policy implementation and its outcomes in the third quarter of 2010. The brief also reviews other economic and financial sector developments. In the conclusion, it provides an inflation outlook for the fourth quarter of 2010. Monetary policy The focus of monetary policy during the third quarter of 2010 continued to be the achievement of the end-year annual inflation target of 8.0%. Consistent with this inflation outturn, annual overall inflation was programmed at 7.3% for end-September 2010. To achieve this, the Bank of Zambia utilised largely Open Market Operations and Government securities auctioning to maintain reserve money within the programmed growth path. This was to be complemented by prudent fiscal management. Inflation Quarterly overall inflation increased to 1.6% in September 2010 from the 1.0% recorded in June 2010, but was slightly lower than the 1.7% recorded in the third quarter of 2009. This outturn was mainly attributed to the rise in food inflation to –0.1% from the –1.7% recorded in the previous quarter, as non-food inflation slowed down to 3.2% from 3.7% during the same period. However, the annual overall inflation rate was largely unchanged at 7.7% in September 2010 compared to the 7.8% recorded in June 2010, but was above the projected 7.3% for the period. This outturn was largely attributed to the decline in annual food inflation to 2.8% from 3.8% recorded in June 2010 as non-food inflation increased to 12.5% from 11.8% during the same period. The decline in food inflation was on account of price reductions on cereals, various vegetables, various beef products, mutton and dried kapenta, due to improved seasonal supply factors. Annual non-food inflation increased on account of pass-through effects of the Kwacha exchange rate depreciation, coupled with higher transport fares and the upward adjustment of electricity tariffs by an average of 25.6% during the period under review. Money supply and domestic credit Preliminary estimates indicate that growth in broad money (M3), comprehensively defined to include foreign currency deposits, was 7.2% in the third quarter of 2010 down from 13.3% as at end-June 2010, and was above the 4.0% projected quarterly growth rate. In absolute terms, M3 is estimated to have increased to K17,898.9 billion from K16,698.3 billion in June 2010. The outturn in M3 was largely due to the increase in both Net Domestic Assets (NDA) and Net Foreign Assets (NFA). On an annual basis, M3 growth increased to 32.0% in September 2010 from 27.7% in June 2010. This outturn was due to the rise in NDA by 96.9% (June 2010, rose by 58.2%) primarily on account of increased lending to government. However, the NFA fell by 9.8% compared with a fall of 1.2% recorded in June 2010. Total domestic credit, comprehensively defined to include foreign currency loans, increased by 3.1% at end-September 2010 compared with 10.1% growth registered in the second quarter of 2010. This was mainly due to a 4.4% rise in net claims on central government. Similarly, lending to the private sector (including public enterprises) grew by 2.2%. On an annual basis, domestic credit growth at 13.5% in September 2010 was 10.1 percentage points lower than the 23.6% recorded in June 2010. This largely reflected a slowdown in credit to the private sector, including public enterprises to 0.7% compared with the 25.9% growth recorded in June 2010. However, lending to the government increased by 41.7% from 108.9% in June 2010. On a sectoral basis, households (personal loans category) continued to account for the largest share of outstanding credit, accounting for 26.3% (26.2%) 1 in September 2010. The agricultural sector was second at 17.1% (18.5%), followed by manufacturing 13.4% (13.0%), wholesale and retail trade, 12.0% (11.7%), transport, storage and communications, 5.3% (5.4%) and real estate, 5.4% (5.2%). Interest rates Demand for Government securities remained strong although it was relatively lower during the quarter under review. Therefore, yield rates trended higher across all tenors. In the Treasury bills market, the composite weighted average yield rate increased by 2.5 percentage points to an average of 7.4% from 4.9% recorded in the second quarter. Similarly, the composite weighted average yield rate for Government bonds increased by 109 basis points to 11.5% during the third quarter, up from an average of 10.4% recorded in the previous quarter. Developments in commercial banks’ nominal interest rates were mixed during the quarter under review. The weighted average lending base rate (WALBR) continued its downward trend, falling to 19.8% from 20.9% in June 2010. Similarly, the average lending rate (ALR) fell marginally to 26.8% in September 2010 from 27.9% in June 2010. However, the 30-day deposit rate for amounts exceeding K20 million and the average savings rate (ASR) for amounts above K100,000 remained unchanged at 5.6% and 4.7%, respectively. Real sector Developments in the real sector were favourable during the reviewed quarter. This was reflected in increased output of metals (copper & cobalt), beer, soft drinks and cement. Further, international arrivals also increased during the period under review. The stock of maize grain held by major millers in the country rose by 124.6% to 101,807.0 metric tonnes (mt) as at 29th September 2010 from 45,336.7 mt as at 30th June 2010. In terms of holdings by province, Lusaka contributed 51,117.1 mt (50.2%), Copperbelt 26,644.0 mt (26.2%), Southern 19,861.0 mt (19.5%), Western province 4,050.0 mt (4.0%), and Northern 35.0 mt (0.03%) respectively, while Eastern province accounted for 100.0 mt (0.1%). During the reviewed quarter, copper output increased by 16.4% to 232,554.87 mt from 199,621.06 mt in the previous quarter. This outturn reflected continued improvement in hydro-geological conditions and uninterrupted mining operations in the country resulting in increased ore extraction at both open pit and deep underground mines. On a year- to-date basis, copper output at 625,844.1 mt was 20.9% higher than the quantity produced in the corresponding period of 2009. Previous quarter. Cobalt output also increased by 16.1% to 2,349.41 mt during the third quarter of 2010 from 2,023.84 mt recorded in the previous quarter. The improvement in output mainly reflects continued benefits arising from the resumption of production at Konkola Copper Mines and Chambishi Metals Plc coupled with improved hydro-geological conditions. Further, cobalt output on a year-to-date basis at 6,362.2 mt was 59.7% higher than the 3,982.9 mt of cobalt produced in the corresponding period of 2009. Cement output 2 increased by 26.1% to 234,240.7 mt in the third quarter of 2010 from 185,702.0 mt during the previous quarter. However, on a year-to-date basis, output of cement at 577,130 mt was 4.0% lower than the 601,432.5 mt produced in the same period of 2009. During the quarter under review, international arrivals at the country’s four international airports 3 were 124,244 passengers compared with 105,163 passengers in the second quarter of 2010. This was 20.7% higher than 102,918 passengers recorded during the same quarter in 2009. Foreign exchange market The slow pace of economic recovery in the United States continued to cast a dark shadow on the US dollar, the world’s most traded currency. The lingering economic uncertainty and the burgeoning fiscal deficit drove the US dollar weaker across all currencies. Therefore, benefitting from the broad based dollar weakness and relatively high levels of US dollar liquidity in the market, the Kwacha posted a 5.0% gain against the American currency. A sustained rise in the copper prices at the London Metal Exchange to an average of US$7,281.08 per tonne in the third quarter from US$6,530.00/per tonne gave further support to the domestic currency, with the interbank rate ending the period at an average of K4,869.21 per US dollar. Balance of payments Preliminary data show that Zambia’s overall balance of payments (BoP) recorded a surplus of US $357.6 million during the third quarter of 2010 compared to a deficit of US $94.3 million in the previous quarter. This was driven by the improvement in the performance of both the current account and the capital and financial account balances. The current account surplus increased to US $453.6 million from a surplus of US $92.8 million recorded the previous quarter, reflecting an increase in the merchandise trade surplus coupled with the narrowing of the services and income accounts deficits. Supporting the current account was the merchandise trade surplus which rose by 74.8% to US $897.2 million in the quarter under review following an increase in exports as well as a decline in imports. Merchandise export earnings edged upward by 18.7% to US $1,949.6 million, on account of increases in both metal and non-traditional export earnings. Metal export earnings recorded a 20.0% rise to US $1,611.5 million during the reviewed period, following a rise in copper export earnings although earnings from cobalt fell. Cobalt export earnings declined by 0.5% to US $75.7 million in the third quarter of 2010 due to a 13.8% drop in the average realised price to US $32,642.20 per mt from US $37,858.20 per mt in the second quarter. Nevertheless, cobalt export volumes increased by 15.4% to 2,318.14 mt in the third quarter of 2010. Does not include production by Zambezi Portland Cement as data was not available at finalisation of the report. Lusaka, Livingstone, Mfuwe and Ndola. During the reviewed period, non-traditional exports (NTEs) increased by 13.2% to US $338.1 million. This was principally due to an increase in export earnings from cane sugar, cotton lint, electrical cables, fresh flowers, fruits and vegetables, and electricity products. Merchandise imports declined by 6.1% to US $1,078.9 million during the reviewed quarter. A slide in import bills associated with commodity groups, such as, petroleum products, fertiliser, paper and paper products, and industrial boilers and equipment, explained this outturn. Developments in the financial sector The overall financial condition of the banking sector for the quarter ended September 2010 was satisfactory. On aggregate, the banking sector was adequately capitalised and the liquidity levels remained high. The sector’s profit after tax also improved, although the asset quality modestly deteriorated. The overall financial condition and performance of the Non Bank Financial Institutions (NBFI) sector was rated fair during the quarter under review. The sector was adequately capitalised with “fair” asset quality while earnings and liquidity performance were also rated “fair”. However, the leasing subsector reported regulatory capital deficiencies. During the quarter under review, the FinScope 2009 Consumer Survey report was launched to the public in Lusaka and Ndola. The survey findings indicated that agricultural activities still remained a major source of income for most Zambians yet the sector was largely underserved. Overall, there was a marginal increase of 3.6 percentage points in financial access to 37.3% in 2009 from 33.7% in 2005. Developments in banking, currency and payment systems During the quarter, there was a continued improvement in the availability of electronic payment options. The number of Point of Sale (POS) terminals increased by 3.8% to 1,033 terminals (Quarter 2 2010: 995). The volume of POS transactions also increased by 15% to 199,817 (Quarter 2 2010: 173,606) while the values increased by 13% to K86 billion (Quarter 2 2010: K76 billion). The number of Automated Teller Machines (ATMs) increased by 4% to 468 ATMs (Quarter 2 2010: 450). The volume of ATM transactions also increased by 11% to 6,333,073 (Quarter 2 2010: 5,697,122). The Bank would like to continue urging the public to use electronic payment methods as they provide a more convenient, safer, efficient and effective way of making payments. The volume and value of cheques returned unpaid on account of insufficiently funded accounts continued to decrease following the issuance of the directives on dishonoured cheques and direct debit instructions by the Bank of Zambia in the second quarter of 2010. The volume of unpaid cheques decreased by 15% to 4,202 (Quarter 2: 4,929). The public is advised to ensure that they have sufficient funds on their accounts whenever they issue cheques in order to avoid charges. Economic reform programme An IMF Mission was in Zambia from 2nd to 15th September, and 28th October to 3rd November 2010, to conduct the 5th Review under the Extended Credit Facility (ECF) arrangement. Overall, the mission was satisfied with the programme performance and reached agreement with the Zambian authorities on a set of macroeconomic policies and structural measures for the remainder of 2010 and for 2011. The policies and structural measures would pave the way for the completion of the Fifth Review of the ECF arrangement, subject to approval by the IMF’s Executive Board. Total disbursed poverty reduction budget support (PRBS) in the third quarter of 2010 amounted to US $19.5 million from the World Bank. A total of US $150.0 million mining tax revenue was received while the Bank of Zambia foreign exchange purchases from the market amounted to US $70.0 million. Preliminary data indicate that the quantitative performance criteria under the Extended Credit Facility (ECF) arrangement were observed as at end-September 2010 and that all structural benchmarks were generally on track. National budget 2011 The Minister of Finance and National Planning announced the 2011 National Budget on October 8, 2010. The Government maintained its focus on diversifying the economy, increasing productive employment and maintaining a stable macro-economic environment. The key Macroeconomic objectives for 2011 are; To exceed 6% GDP growth; To reduce end-year inflation to 7.0%; and To maintain international reserves of at least 4 months of import cover. The growth in GDP for 2011 is premised on the continued strong performance of the agriculture, mining, construction, manufacturing, transport and communications and tourism sectors. Inflation outlook for the third quarter of 2010 In the fourth quarter of 2010, annual overall inflation is projected to remain below the end year target of 8.0%. This favourable outlook is on account of expected stability in maize prices in view of the bumper harvest in 2010, favourable supply of vegetables and fresh fish during the period and relative stability of the exchange rate of the Kwacha against the US dollar for much of the fourth quarter. However, the Bank of Zambia will continue to monitor developments and undertake appropriate monetary policy actions to ensure that monetary targets are achieved. To contain growth of money supply within the programmed path, Bank of Zambia will continue to employ open market operations and auctioning of Government securities. This is expected to be complemented by prudent fiscal operations. I thank you for your attention. Introduction This brief examines monetary policy implementation and its outcomes in the third quarter of 2010. The brief also reviews other economic and financial sector developments. In the conclusion, it provides an inflation outlook for the fourth quarter of 2010. Monetary policy The focus of monetary policy during the third quarter of 2010 continued to be the achievement of the end-year annual inflation target of 8.0%. Consistent with this inflation outturn, annual overall inflation was programmed at 7.3% for end-September 2010. To achieve this, the Bank of Zambia utilised largely Open Market Operations to maintain reserve money within the programmed growth path. This was to be supported by the auctioning of Government securities and the maintenance of the fiscal deficit within the programme limits. Inflation Quarterly overall inflation increased to 1.6% in September 2010 from the 1.0% recorded in June 2010, but was slightly lower than the 1.7% recorded in the third quarter of 2009. This outturn was mainly attributed to the rise in food inflation to –0.1% from the –1.7% recorded in the previous quarter, as non-food inflation slowed down to 3.2% from 3.7% during the same period. However, on an annual basis, overall inflation was little changed at 7.7% in September 2010 when compared to the 7.8% recorded in June 2010, but was above the projected 7.3% for the period. This annual inflation outturn was largely attributed to the decline in annual food inflation to 2.8% from 3.8% recorded in June 2010, as annual non-food inflation rose to 12.5% from 11.8% during the same period. Food inflation Quarterly food inflation rose to –0.1% in September 2010 from the –1.7% recorded in the previous quarter, but was 1.0 percentage point below the 0.9% recorded during the third quarter of 2009. This was due to higher prices of rice, various beef products, pork chops, mutton, fresh kapenta, dried kapenta, carrots, green beans, groundnuts and cassava tubers during the quarter under review. This was attributed to the impact of the upward adjustment of transport charges in July 2010 on the commodity market. Annual food inflation fell on account of price reductions on cereals, various vegetables, groundnuts, tubers, beef products (fillet steak, rump steak), mutton and dried kapenta, due to improved seasonal supply factors. Non-food inflation Quarterly non-food inflation slowed down to 3.2% from the 3.7% observed in June 2010, but was 0.7 percentage points above the 2.5% recorded in the third quarter of 2009. This was mainly attributed to lower quarterly inflation for the following sub-groups: Furniture and household goods of 4.5% [7.5%], Medical care 1.6% [2.7%], Transport and communications 0.9% [5.1%], Recreation and Education –0.1% [1.3%], and other goods and services 1.7% [2.8%]. However, on an annual basis, non-food inflation increased to 12.5% from the 11.8% registered in June 2010. This was due to higher annual inflation rates for the following subgroups: Clothing and footwear by 11.3%, [9.9%] 4 ; Furniture and household goods 11.5%, [10.1%]; Transport and communications 15.3%, [11.1%]; and other goods and services 14.1%, [12.8%]. These developments reflected pass-through effects of the Kwacha exchange rate depreciation by 4.8% over the 12 month period, coupled with higher transport fares and the upward adjustment of electricity tariffs by an average of 25.6% during the period under review. Non-food inflation contributed 6.3 percentage points to the annual overall inflation outturn. The numbers in square brackets are for June 2010. Broad money and domestic credit 5 Preliminary estimates indicate that growth in broad money (M3), comprehensively defined to include foreign currency deposits, was 7.2% in the third quarter of 2010 down from 13.3% as at end-June 2010, and was above the 4.0% projected quarterly growth rate. In absolute terms, M3 is estimated to have increased to K17,898.9 billion from K16,698.3 billion in June 2010. The outturn in M3 was largely due to the increase in both NDA and NFA. NFA edged up by 12.2% mainly on account of a 15.7% increase in gross international reserves to US $1,972.0 million as at end-September 2010. The increase in NDA was mainly due to the expansion in lending to the Government. Excluding foreign currency deposits that increased by 30.2% (June 2010, fell by 5.1%), money supply declined by 2.0% compared to the 22.9% growth recorded during the second quarter of 2010. On an annual basis, M3 growth increased to 32.0% in September 2010 from 27.7% in June 2010. This outturn was due to the rise in NDA by 96.9% (June 2010, rose by 58.2%) primarily on account of increased lending to government. However, the NFA fell by 9.8% compared with a fall of 1.2% recorded in June 2010. Excluding foreign currency deposits that grew by 29.8% (June 2010, fell by 5.9%), money supply growth was 33.2% from the 49.0% recorded in June 2010. Total domestic credit, comprehensively defined to include foreign currency loans, increased by 3.1% at end-September 2010 compared with 10.1% growth registered in the second quarter of 2010. This was mainly due to a 4.4% rise in net claims on central government that contributed 1.7 percentage points to the growth in domestic credit. Similarly, lending to the private sector (including public enterprises) grew by 2.2% and contributed 1.4 percentage points to the total domestic credit outturn. Excluding foreign currency denominated credit, which fell by 4.1%, domestic credit increased by 5.2% compared to the 7.5% registered in June 2010. On an annual basis, domestic credit growth at 13.5% in September 2010 was 10.1 percentage points lower than 23.6% recorded in June 2010. This largely reflected a slowdown in credit to the private sector, including public enterprises, to 0.7% compared with the 25.9% growth recorded in June 2010. This outturn contributed 0.4 percentage points to the total domestic credit growth in the quarter under review. However, lending to the government increased by 41.7% from 108.9% in June 2010 and contributed 13.1 percentage points to the total domestic credit growth. On a sectoral basis, households (personal loans category) continued to account for the largest share of outstanding credit, accounting for 26.3% (26.2%) 6 in September 2010. The agricultural sector was second at 17.1% (18.5%), followed by manufacturing 13.4% (13.0%), wholesale and retail trade, 12.0% (11.7%), transport, storage and communications, 5.3% (5.4%) and real estate, 5.4% (5.2%). Interest rates Demand for Government securities remained strong although it was relatively lower during the quarter under review. The average rate of subscription at the Treasury bill tenders was recorded at 123.7% down from 129.5% in the preceding period. Similarly, the average rate of subscription rate for Government bonds was down at 123.5% compared with 126.6% recorded in the second quarter. Although participation at the auctions was strong, yield rates trended higher across all tenors, as investors sought to sustain recent gains on government paper. Estimates used before monetary survey is compiled. Previous quarter. In the Treasury bills market, the composite weighted average yield rate increased by 2.5 percentage points to an average of 7.4% from 4.9% recorded in the second quarter. Similarly, the composite weighted average yield rate for Government bonds increased by 109 basis points to 11.5% during the third quarter, up from an average of 10.4% recorded in the previous quarter. During the quarter ending September 2010, developments in commercial banks’ nominal interest rates were mixed. The weighted average lending base rate (WALBR) continued its downward trend, falling to 19.8% from 20.9% in June 2010. Similarly, the average lending rate (ALR) fell marginally to 26.8% in September 2010 from 27.9% in June 2010. However, the 30-day deposit rate for amounts exceeding K20 million and the average savings rate (ASR) for amounts above K100,000 remained unchanged at 5.6% and 4.7%, respectively. Real sector developments Developments were favourable in the real sector during the reviewed quarter. This was reflected in increased output of metals (copper & cobalt), beer, soft drinks and cement. Further, international arrivals also increased during the period under review. Agriculture The stock of maize grain held by major millers in the country rose by 124.6% to 101,807.0 mt as at 29th September 2010 from 45,336.7 mt as at 30th June 2010. In terms of holdings by province, Lusaka contributed 51,117.1 mt (50.2%), Copperbelt 26,644.0 mt (26.2%), Southern 19861.0 mt (19.5%), Western 4,050.0 mt (4.0%), and Northern 35.0 mt (0.03%) respectively, while Eastern province accounted for 100.0 mt (0.1%). Data on maize stocks from Central province was not available at the reporting date. Mining During the reviewed quarter, copper output increased by 16.4% to 232,554.87 mt. This output was also 30.5% higher than the 178,140.1 mt of copper produced in the third quarter of 2009. This outturn reflected continued improvement in hydro-geological conditions and uninterrupted mining operations in the country at both open pit and deep underground mines. On a year to date basis, copper output at 625,844.1 mt was 20.9% higher than the quantity produced in the corresponding period of 2009. Cobalt output also increased by 16.1% to 2,349.41 mt during the third quarter of 2010 from 2,023.84 mt recorded in the previous quarter. This level of output reflected a 16.6% rise compared to 2,015 mt produced in the third quarter of 2009. The improvement in output mainly reflects continued benefits arising from the resumption of production at Konkola Copper Mines and Chambishi Metals Plc coupled with improved hydro-geological conditions. Further, cobalt output on a year-to-date basis at 6,362.2 mt was 59.7% higher than the 3,982.9 mt of cobalt produced in the corresponding period of 2009. Manufacturing Cement output 7 by the monitored company increased by 26.1% to 234,240.7 mt in the third quarter of 2010 from 185,702.0 mt during the previous quarter. Nonetheless, on a year-todate basis, output of cement at 577,130 mt was 4.0% lower than the 601,432.5 mt produced in the same period of 2009. Does not include production by Zambezi Portland Cement as data was not available at finalisation of the report. During the quarter under review, production of clear beer by the monitored company increased by 26.7% to 223,607 hectolitres from 176,515 hectolitres the previous quarter Further, this output was 45.9% higher than the 153,220 hectolitres produced in the corresponding quarter of 2009. Output of soft drinks by the monitored company rose by 1.8% to 127,244.0 hectolitres from 124,944.0 hectolitres produced in the previous quarter. Moreover, this output level was 38.3% higher than 91,968.0 hectolitres produced in the corresponding quarter of 2009. Production of milk by the monitored company during the quarter under review rose by 4.2% to 7,830,878 litres from 7,510,227 litres produced in the second quarter of this year. However, this output was 1.2% lower than 7,924,054.0 litres of milk produced during the corresponding quarter of 2009. Tourism During the quarter under review, international arrivals at the country’s four international airports 8 were 124,244 passengers compared with 105,163 passengers in the second quarter of 2010. This was 20.7% higher than 102,918 passengers recorded during the same quarter in 2009. Livingstone and Mfuwe international airports, which are the major tourist destinations, accounted for 21,272 passengers and 241 passengers compared with 18,180 passengers and 269 passengers in the previous quarter, respectively. During the third quarter of 2010, tourist entries into the country’s national parks 9 were 25,244 compared with 13,737 in the previous quarter. Nevertheless, this was lower than 26,720 in the corresponding quarter of 2009. Europe accounted for 9,404 followed by Zambia (residents) at 7,308 while North America, Rest of America and Australasia were 4,016, 2,810 and 1,412 respectively. The rise in the entries into the country’s national parks was in part attributed to the world cup and improved weather conditions. External sector developments Foreign exchange market The slow pace of economic recovery in the United States continued to cast a dark shadow on the US dollar, the world’s most traded currency. The lingering economic uncertainty and the burgeoning fiscal deficit drove the US dollar weaker across all currencies. Therefore, benefitting from the broad based dollar weakness and relatively high levels of US dollar liquidity in the market, the Kwacha posted a 5.0% gain against the American currency. A sustained rise in the copper prices at the London Metal Exchange to an average of US$7,281.08 per tonne in the third quarter from US$6,530.00/per tonne gave further support to the domestic currency, with the interbank rate ending the period at an average of K4,869.21 per US dollar. The weakness in the US dollar saw the Euro and the pound sterling rebound, underpinned by austerity measures instituted in Greece and the United Kingdom and favourable bank stress test results in the European Union banking sector. Reflecting this recovery, the South African rand, which tracks the euro, also performed well, posting significant gains in the currency market. These developments saw the Kwacha depreciate against the three currencies during the review period. It shed off 1.3% value against the euro and depreciated by 1.9% vis-à-vis the rand ending the quarter at an average of K6,344.50/€ and Lusaka, Livingstone, Mfuwe and Ndola. South Luangwa, Mosi-oa-Tunya, Lower Zambezi, Kafue, North Luangwa, Blue Lagoon. K677.45/ZAR, respectively. The rate of depreciation against the pound sterling was relatively lower at 0.6% with the Kwacha trading at K7,560.15/£. With regard to the volume of foreign exchange transactions, a total of US$1,230.7 million was exchanged in the domestic interbank market. From the rest of the market, commercial banks purchased a net of US$49.2 million compared to net sales of US$4.7 million the previous quarter. Similarly banks made net purchases of €1.4 million Euros during the review period. Conversely, banks’ net sales of the South African rand amounted to ZAR729.3 million, higher than ZAR645.3 million recorded in the second quarter. Transactions involving the pound sterling followed a similar trend, with commercial banks recording net sales of ₤2.5 million depicting a reduction over the previous quarter’s net sales of ₤1.7 million. Balance of payments Preliminary data show that Zambia’s overall balance of payments (BoP) recorded a surplus of US $357.6 million during the third quarter of 2010 compared to a deficit of US $94.3 million in the previous quarter. This was driven by the improvement in the performance of both the current account and the capital and financial account balances. The current account surplus increased to US $453.6 million from a surplus of US $92.8 million recorded the previous quarter, reflecting an increase in the merchandise trade surplus coupled with the narrowing of the services and income accounts deficits. Supporting the current account was the merchandise trade surplus which rose by 74.8% to US $897.2 million in the quarter under review following an increase in exports as well as a decline in imports. Merchandise export earnings edged upward by 18.7% to US $1,949.6 million, on account of increases in both metal and non-traditional export earnings. Metal export earnings recorded a 20.0% rise to US $1,611.5 million during the reviewed period, following a rise in copper export earnings although earnings from cobalt fell. Cobalt export earnings declined by 0.5% to US $75.7 million in the third quarter of 2010 due to a 13.8% drop in the average realised price to US $32,642.20 per mt from US $37,858.20 per mt ton in the second quarter. This was despite the increase in cobalt export volumes by 15.4% to 2,318.14 mt in the third quarter of 2010. During the reviewed period, non-traditional exports (NTEs) increased by 13.2% to US $338.1 million. This was principally due to an increase in export earnings from cane sugar, cotton lint, electrical cables, fresh flowers, fruits and vegetables, and electricity products. Merchandise imports declined by 6.1% to US $1,078.9 million during the reviewed quarter. A slide in import bills associated with commodity groups, such as, petroleum products, fertiliser, paper and paper products, and industrial boilers and equipment, explained this outturn. During the same quarter, the services and income account deficits narrowed by 5.7% and 1.5% to US $168.0 million and US $369.3 million, respectively. The capital and financial account surplus increased to US $278.5 million in the third quarter 2010 from US $122.3 million the previous quarter. This was largely due to an increase in project grants coupled with a reduction in portfolio and other investment outflows. Developments in the financial sector The overall financial condition of the banking sector for the quarter ended September 2010 was satisfactory. On aggregate, the banking sector was adequately capitalised and the liquidity levels remained high. The sector’s profit after tax also improved, although the asset quality modestly deteriorated. The overall financial condition and performance of the Non Bank Financial Institutions sector was rated fair during the quarter under review. The sector was adequately capitalised with “fair” asset quality while earnings performance was rated “satisfactory”. However, the leasing subsector reported regulatory capital deficiencies and unsatisfactory earnings performance. During the quarter under review the Financial Sector Development Plan (FSDP) Implementation and FSDP Steering Committees approved the work plans and budgets of the six FSDP Working Groups for the period 2010 to 2012. During the quarter under review, the FinScope 2009 Consumer Survey report was launched to the public in Lusaka and Ndola. The survey findings indicated that agricultural activities still remained a major source of income for most Zambians but that this sector was largely under-served by financial service providers. The survey findings also showed that there was an increase in the number and types of banking services and products but that the uptake had remained unchanged as the focus of financial service providers appeared to be serving the same market, as opposed to enhancing financial inclusion. Overall, there was a marginal increase of 3.6 percentage points in financial access to 37.3% in 2009 from 33.7% in 2005. Developments in banking, currency and payment systems During the quarter, there was a continued improvement in the availability of electronic payment options. The number of Point of Sale (POS) terminals increased by 3.8% to 1,033 terminals (Quarter 2, 2010: 995). The volume of POS transactions also increased by 15% to 199,817 (Quarter 2, 2010: 173,606) while the values increased by 13% to K86 billion (Quarter 2, 2010: K76 billion). The number of Automated Teller Machines (ATMs) increased by 4% to 468 ATMs (Quarter 2 2010: 450). The volume of ATM transactions also increased by 11% to 6,333,073 (Quarter 2 2010: 5,697,122) while the value increased by 16% to K2,898 billion (Quarter 2 2010: K2,498 billion). The Bank would like to continue urging the public to use electronic payment methods as they provide a more convenient, safer, efficient and effective way of making payments. The volume and value of cheques returned unpaid on account of insufficiently funded accounts continued to decrease following the issuance of the directives on dishonoured cheques and direct debit instructions which were issued by the Bank of Zambia in the second quarter of 2010. The volume of unpaid cheques decreased by 15% to 4,202 (Quarter 2: 4,929). Similarly the value of unpaid cheques decreased by 6.6% to K35.3 billion from K37.8 billion reported in the second quarter of 2010. The public is advised to ensure that they have sufficient funds in their accounts whenever they issue cheques in order to avoid charges. Economic reform programme An IMF Mission was in Zambia from 2nd to 15th September 2010, to conduct the 5th Review under the Extended Credit Facility (ECF) arrangement. Overall, the mission was satisfied with the programme performance. A follow-up mission visited the country from 28th October to 3rd November 2010 to conclude the discussions. The mission had fruitful discussions with the Zambian authorities and reached agreement on a set of macroeconomic policies and structural measures for the remainder of 2010 and for 2011. The policies and structural measures would pave the way for the completion of the Fifth Review of the ECF arrangement, subject to approval by the IMF’s Executive Board. The Board meeting is expected to be held around mid-December 2010. The IMF mission commended the Zambian Government for its handling of economic policy so far in 2010. Notably, fiscal performance has been broadly in line with expectations although there was been need to finance the purchase of the maize surplus. The mission also noted that the Bank of Zambia managed monetary policy well with a view to reducing inflation whilst at the same time maintaining conditions to facilitate economic growth. Economic prospects remain favourable, with growth projected to remain strong in 2010. In addition, the 2011 budget is consistent with the maintenance of sound macroeconomic policies. Furthermore, envisaged revenue enhancement which stems from new tax policy measures and administrative improvements, is appropriately ambitious whilst the expenditure mix shifts towards capital and social spending. Total disbursed poverty reduction budget support (PRBS) in the third quarter of 2010 amounted to US $19.5 million from the World Bank. A total of US $150.0 million mining tax revenue was received from First Quantum Mining Plc while the Bank of Zambia foreign exchange purchases from the market amounted to US $70.0 million. Against these inflows were payments to PTA Bank (US $116.0 million) for oil procurement and debt service payments (US $15.9 million). Preliminary information showed that the Net Domestic Assets (NDA) of the Bank of Zambia, the Net Domestic Financing (NDF) of Government and the Unencumbered International Reserves (UIR) quantitative performance criteria under the Extended Credit Facility (ECF) arrangement were observed as at end-September 2010. Further, all structural benchmarks were generally on track. National budget 2011 The Minister of Finance and National Planning announced the 2011 National Budget on October 8, 2010. In the budget, the Government maintained its focus on diversifying the economy, increasing productive employment and maintaining a stable macro-economic environment. The key Macroeconomic objectives for 2011 are; To exceed 6% GDP growth; To reduce end-year inflation to 7.0%; and To maintain international reserves of at least 4 months of import cover. The growth in GDP for 2011 is premised on the continued strong performance of the agriculture, mining, construction, manufacturing, transport and communications and tourism sectors. Inflation outlook for the fourth quarter of 2010 In the fourth quarter of 2010, annual overall inflation is projected to remain below the end year target of 8.0%. This favourable outlook is on account of expected stability in maize prices in view of the bumper harvest in 2010; expected favourable supply of vegetables and fresh fish during the period and expected relative stability of the exchange rate of the Kwacha against the US dollar for much of the fourth quarter. At end-September 2010, annual inflation was largely unchanged at 7.7% compared to the 7.8% recorded in June 2010, due to a decline in annual food inflation against a rise in annual non-food inflation during the same period. Consistent with this outturn, inflation projections indicate an annual overall inflation rate of 7.3% for end-December 2010. The Bank of Zambia will continue to monitor developments and undertake appropriate monetary policy actions to ensure that monetary targets are achieved. To contain growth of money supply within the programmed path, Bank of Zambia will continue to employ open market operations and auctioning of Government securities. This is expected to be complemented by prudent fiscal operations. | bank of zambia | 2,010 | 11 |
Keynote address by Mr Caleb M Fundanga, Governor of the Bank of Zambia, at the African Securities Exchange Association ASEA conference on "The Role of Financial Systems in Capital Markets Development", Livingstone, 11 November 2010. | Caleb M Fundanga: The role of financial systems in capital markets development? Keynote address by Mr Caleb M Fundanga, Governor of the Bank of Zambia, at the African Securities Exchange Association (ASEA) conference on “The Role of Financial Systems in Capital Markets Development?”, Livingstone, 11 November 2010. * * * The Minister of Finance and National Planning, Hon Situmbeko Musokotwane M.P; The Chief Executive Officer of the Securities and Exchange Commission, Mr Clement Sichembe; The Chief Executive Officer of the Lusaka Stock Exchange, Mrs Beatrice Nkanza; Members of the African Securities Exchange Association; Distinguished Resource Persons; Members of the Press; Ladies and Gentlemen. Let me begin by welcoming you all to this conference and on behalf of my fellow Zambians extend a warm welcome to our visiting colleagues from outside Zambia, to Livingstone. Allow me Chairperson to take this opportunity to commend LUSE and ASEA (African Securities Exchange Association) for organising this seminar and the tremendous efforts made in enhancing functions of the regional securities exchanges. As our countries continue to recover from the recent global financial crisis, the continent requires financial platforms that will facilitate the recovery efforts and provide an enabling environment to meet the various developmental challenges that the continent faces. I am greatly honoured to have this privilege to share some thoughts on “The Role of Financial Systems in Capital Markets development”. The importance of financial systems has indeed been highlighted during the recent global financial crisis in which markets without properly functioning financial systems were affected more severely than those that had a semblance of well functioning systems. Evidently, from the theme of your conference, “Integration of African Capital Markets through technology” we can see the importance the interrelationships of financial systems and other sectors of the economy. Ladies and Gentlemen, economists and market players have long recognized the importance of the financial system. During each financial crisis including the recent global financial crisis, we have increasingly heard that the financial system was one of the main causes of the crisis, and that the financial system needs to be reformed in order to resolve the crisis. Many of these discussions treat the financial system in isolation or link it superficially to the macro-economy, however to put these issues in perspective let us first look at the importance and limitations of financial markets. The importance and limitations of financial markets I would like to begin by discussing the role of the financial system and why it is different from other sectors of the economy. Individual entrepreneurs rarely have enough of their own capital to undertake investments themselves. Individual savers, without pooling their money, would not be able to take advantage of the potential increasing returns to scale of their investments, and would face a large degree of risk with little liquidity. The financial system – including banks and other financial intermediaries, equity markets, and debt markets, solves these problems by agglomerating capital from many smaller savers, allocating capital to the most important uses, and monitoring to ensure that it is being used well. At the same time, the financial system transfers, pools, and reduces risk, increases liquidity, and conveys information. Ladies and Gentlemen, let me also highlight the importance of financial markets and how they inter-relate with firms and contribute to economic growth and enhance social welfare. Whether financial systems are relatively simple or highly complex, they perform the same broad functions and share the same key characteristics. Their primary role in any economy is to mobilize resources for productive investment. An efficient financial system channels resources to activities that will provide the highest rate of return for investors. These resources stimulate economic growth, provide enterprises with the ability to become more productive and generate new jobs. Clearly effective financial markets are indispensable to the pursuit of sustained, broad-based economic growth. Unfortunately, financial markets development is one of the most complex areas in the development field. Every economy needs to find modalities that facilitate financial markets development and provide a policy and regulatory environment that encourages the appearance of competitive forces, the use of a variety of debt and equity instruments, and promotes the growth of different kinds of institutions and systems that offer a wide range of financial instruments and services and protects the interests of savers by reducing their risks. In protecting the interests of market players, financial systems, i.e. financial intermediaries and financial markets, channel funds from those who have savings to those who have more productive uses for them. They perform two main types of financial service that reduce the costs of moving funds between borrowers and lenders, leading to a more efficient allocation of resources and faster economic growth. The two services are basically the provision of liquidity and the transformation of the risk characteristics of assets. Role of capital in financial markets and development The efficiency with which financial markets contribute to economic growth largely depends on the availability of affordable capital and its efficient allocation to productive sectors of the economy. Efficient capital allocation means that funds are channelled to investment projects or firms that bring the most value to the economy. Therefore, there is an intimate relationship between capital on one hand, and economic development on the other. In order to promote economic growth, financial institutions have the primary responsibility of ensuring that capital is allocated to the most productive projects which assure the highest return possible. Thus, the main mechanisms of growth stem from the improvements in the functioning of financial markets, and the effect this has on transforming risks and maturity of assets and liabilities of which capital markets development plays an important role. Ladies and Gentlemen, even as the private sector takes centre stage in this process, the government also has an important role to play. The absence of government means that financial markets operate without proper regulatory structures. Without a formally regulated financial system, informal financial markets tend to fill in the gap but at sub-optimal levels with high transactions and other related costs. As a result, there is less efficient allocation of capital which in turn translates into low levels of economic growth as investment funding is limited by the cost of transactions. Therefore, efficient capital allocation relies chiefly on a properly functioning financial system, which enables firms and households to share risks and also facilitates the transformation of more liquid liabilities into illiquid but productive investments. Instruments and the structure of capital markets Distinguished ladies and gentlemen: Looking at the objective of every economy, it is clear that all countries develop the depth and breadth of their financial markets to meet the needs of the real economy. This includes making a wide range of choices available to investors and issuers of securities in fixed-income and equity markets. Bond issuers, for example, would ideally be able to issue a variety of maturities with both variable and fixed rates. Money markets: The market for securities of less than one year includes government and central bank bills, repurchase agreements of government paper (repos), commercial bank certificates of deposit, corporate commercial paper and trade finance instruments such as bankers’ acceptances. These markets, in their inter-bank or over-the-counter (OTC) form, have been in existence for a long time in many countries. A newer phenomenon, however, has been for these instruments to be listed on organized stock exchanges and for central banks to increasingly conduct monetary policy through open market operations in these instruments. Ladies and Gentlemen, in developing economies debt markets which include public entities (ministries of finance, central banks and specialized government agencies for housing, agriculture, export and industry), are the most creditworthy borrowers and generally dominate the issue of local currency debt. However, we are seeing an increasing ability to issue corporate obligations beyond one year in local bond markets. The maturity structure (yield curve), however, generally does not extend beyond two or three years, and the central problem for both government and corporate borrowers is to push out maturities as far as is possible. Equity Markets which are organized stock exchanges in emerging economies have been slow to develop because of the traditional reluctance of closely-held firms to divulge information to the public or an unwillingness to dilute voting power and control of the firm. For these reasons, closely-held private placements have historically been more important. Another important group of investors in capital markets are Institutional Money Managers. These include insurance companies, mutual funds and pension funds which achieve important economies of scale through pooling small savings, diversifying investments and monitoring market information. Institutional investors raise the level of professionalism within markets through requiring better information and increased transparency. Financial infrastructure: Capital market participants nearly unanimously agree that they should not engage in underwriting, trading or asset management activities in the absence of a secure legal and regulatory environment. Foreign investment funds usually cannot go into a market that lacks adequate legislation and oversight. Ladies and Gentlemen, many organized exchanges operate as self-regulatory organizations (SROs) that sometimes do not meet internationally recognized norms for transparency and disclosure. Although exchanges perform a self-regulatory function, most developed financial systems additionally have a securities exchange commission-type institution that provides an additional layer of oversight. Investors look to these organizations to safeguard the markets through establishing minimum standards of capitalization, registration of securities and market participants, timely and material disclosure and effective enforcement. In addition to the legal and regulatory framework, the financial infrastructure should include a non-bank payments system for the organized exchanges. Commonly called clearance and settlement within a central securities depository, these clearing houses depend importantly on legislation enabling their establishment and on the clarification of legal concepts such as netting and the treatment of guarantees in bankruptcy for their effective operation. Role of financial systems Distinguished Ladies and Gentlemen, in development finance it is recognised that economic development is partially dependent on the financial system to help mediate the transfer of money to areas of the economy that need it most. The financial system has a number of key functions, which help facilitate these shifts in money that are important for sustainable economic growth. The most important of these are: Savings; Loans; Investments; Business Growth and Government Expenditure Responding to international capital flows Distinguished Ladies and Gentlemen, I would like to discuss, though briefly, the role international capital flows and their effects on our economies. Many of the same principles that apply in domestic capital markets also apply in international capital markets. The probability of default is essential to understanding international capital flows and exchange rate movements. Asymmetric information, for instance between foreign and domestic investors, can have important consequences. And, as in domestic markets, there is no presumption that the market, left to itself, is efficient. Today, developing countries are more vulnerable to international capital flows than ever before. What would have been a mistake with minor consequences in a closed economy can become magnified into a major crisis in an open economy. This is the lesson many people draw from the recent crisis which struck a number of economies in the world. Inadequate financial supervision and regulation, problems with macroeconomic management, and a general lack of transparency certainly contributed to the problems. Ladies and Gentlemen, even with the best economic management, small open economies remain vulnerable. They are like small rowboats on a wild and open sea. Although we may not be able to predict it, the chances of eventually being broadsided by a large wave are significant no matter how well the boat is steered. Though, to be sure, bad steering probably increases the chances of a disaster, and a leaky boat makes it inevitable, even on a relatively calm day. Ladies and Gentlemen, let’s turn to the role of monetary policy and central banks Price stability The interaction between financial markets, economic growth and monetary policy is by no means a new issue for central bankers. However, financial market developments have brought the question to the forefront of the policy debate. The continued integration and deepening of financial markets is a significant issue for policy-makers, and particularly for central bankers, since smoothly functioning and efficient financial markets are crucial in ensuring a smooth transmission of monetary impulses. The best contribution that monetary policy can make to the smooth functioning and integration of financial markets and to economic growth is to maintain steady medium-term price stability. Such a policy will be beneficial, as it will minimise the adverse effects of inflation and high inflation uncertainty. As we all know, price stability is beneficial in numerous ways. It not only creates a climate for higher economic activity over the medium term, but also reduces the economic and social inequalities caused by the asymmetric distribution of the costs of inflation among the various economic agents. Financial system stability and the role of central banks in banking supervision Ladies and Gentlemen, the design of prudential regulation plays an important role from a growth perspective. Supervision is the guardian of financial stability, which in turn crucially determines the capability of the financial system to allocate resources efficiently and absorb liquidity shocks. Financial crises can have a deep and protracted impact on economic growth, as illustrated by several episodes of financial instability that occurred in many countries. The contribution of prudential supervision to economic growth proceeds along two dimensions. From a preventive perspective, supervision has to ensure a continuous and comprehensive monitoring of all the potential threats to financial stability. The role of supervision is also crucial after the emergence of a crisis, in order to provide for a swift and ordered resolution. Supervisors can only be effective in these two respects if they are able to pay sufficient attention to systemic issues, namely the risk of contagion effects. Policy measures aimed at development of capital markets Ladies and Gentlemen, despite the threat of the recent global financial crisis, the Zambian financial sector is currently resilient. The level of liquidity is also high, spurred largely by tighter lending conditions as banks slowed down on lending to the private sector. However, these developments also project the improvements in regulatory and supervisory oversight which continues to be updated. Distinguished Ladies and Gentlemen, for Zambia the vision is to become a prosperous middle income country by the year 2030. In order for us to attain this vision, there is need to improve the financial infrastructure in Zambia. Since 2004, the Government has been implementing the Financial Sector Development Plan with the view to improve the functioning of financial markets and increase accessibility to financial services by a majority of Zambians. The second phase of the FSDP is currently underway after the initial five-year plan lapsed. We cannot deny that an improved financial infrastructure will result in efficient capital and money markets which in turn will attract domestic and foreign investment in the economy. Conclusion In conclusion Ladies and Gentlemen I would just want to emphasise that Zambia and many of our regional counterparts are small countries in need of investment. However, the high cost of capital has hampered the increase in investment, particularly among the SMEs which continue to face enormous financing challenges. Therefore provision of appropriate financing to this category of firms is likely to lead to higher investment opportunities and more efficient methods of production. In turn, this will translate into poverty alleviation due to employment creation. Ladies and Gentlemen you will agree with me that we have come a long way since the time when many viewed the financial system simply as a sideshow, or a passive channel that allocated scarce resources to the most efficient uses. Today, almost everyone agrees that the financial system is essential for development. Improving the financial system can lead to higher growth and reduce the likelihood and severity of crises. It is essential that we have a clear understanding of the causes of business cycles and the working of monetary policy. In thinking about financial reform, we need to treat liberalization as a means rather than an end. Instead of pushing for immediate deregulation, we should try to understand the important role authorities play in financial markets. These steps will not only result in a better and more stable allocation of domestic capital, but also help countries to develop their capital markets with the requisite financial systems. In view of this I encourage you all to join hands with authorities in your countries in improving financial infrastructure so as to contribute to the development of our regional financial systems and thereby improving the availability of capital. I am also encouraged by the increasing number of financial service providers in our economies. As competition intensifies, banks and other financial institutions will start to reposition themselves by lowering the cost of lending to the private sector. On the policy front, central banks should continue to conduct monetary and supervisory policies that create incentives for the financial sector to thrive so as to enable them provide better services. Ladies and Gentlemen, with these few remarks I would like to conclude here and wish you success in the rest of your deliberations for this conference. I thank you for your attention. | bank of zambia | 2,010 | 11 |
Opening remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the signing ceremony of the Memorandum of Understanding between the Bank of Zambia and the Chinese International School in Zambia, Lusaka, 22 December 2010. | Caleb M Fundanga: The importance of multi-cultural awareness and language learning Opening remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the signing ceremony of the Memorandum of Understanding between the Bank of Zambia and the Chinese International School in Zambia, Lusaka, 22 December 2010. * * * The Ambassador of the People’s Republic of China to Zambia, H.E Mr. Li Qiangmin The Chairperson – Chinese International School in Zambia, Mr Li Tie The Deputy Governor Administration – Dr Tukiya Kankasa-Mabula The Deputy Governor Operations – Dr Austin Mwape The Principal – Chinese International School in Zambia, Mr. Tan Haitao Distinguished Teachers from the Chinese International School in Zambia Colleagues from the Bank Members of the Press Distinguished Ladies and Gentlemen It gives me great delight, on behalf of the Bank of Zambia, to welcome you all to this important signing ceremony of the Memorandum of Understanding (MoU) between the Bank of Zambia and the Chinese International School in Zambia. The MoU that we are about to sign today provides a framework for the provision of Chinese language lessons to members of staff at the Bank of Zambia. Your Excellency, the Bank of Zambia attaches great importance to the need for staff to learn other international languages. In the process of both economic globalization and diversity of culture, language has become more and more important. Multilingualism is important in our world today not only in terms of communicating and advancing in the global economy, but also in order to understand other cultures. It is important because we need to know more about other nations’ cultures and history to improve world relations. In this regard, in October 2004, the Bank entered into an agreement with the Embassy of the Republic of France for the provision of French lessons to members of staff. To date several members of staff have benefited from this programme and can comfortably speak, write and understand the French language. Ladies and Gentlemen, the importance of China on the world economy cannot be overemphasized. With the sustainable development of the Chinese economy and the increasing promotion of the status of China in the world, particularly the China’s access to the World Trade Organization, the successful hosting of the 2008 Olympics in Beijing and the World Expo 2010 in Shanghai, it is imperative to understand the Chinese language owing to its important role in business and trading. There is therefore a need for people to understand Chinese culture, economy, politics, and the lives of 1.3 billion Chinese people. Furthermore, the rapid growth of the Chinese economy has entailed greater demand for primary commodities like copper. Coupled with this, the demand for manufactured goods from China has increased in a number of countries including Zambia. The level of Chinese investment pouring into the country has also significantly increased while the Chinese community in the country has continued to grow following the rising number of Chinese investments in Zambia. The level of interactions between Zambian businesses and those from China has therefore significantly increased. However, the obvious and notable obstacle to the smooth conduct of business transactions and interactions between the people of our two countries has been the language barrier. Many a time, communication between our people has been through the use of interpreters. Reliance on interpreters can be very inconveniencing, ineffective and costly. This barrier can be overcome by learning the Chinese language. It is against this background that the Bank has taken keen interest in launching this MoU. The principal objectives of the MoU are to: a) establish a framework in which the Chinese International School can facilitate capacity building in learning the Chinese language among BOZ employees; b) promote multi-cultural awareness and appreciation of a diversity of languages necessary for Bank staff to transact effectively and efficiently in social and professional fora which require the usage of Chinese; and c) enhance opportunities for bi-and or multilateral co-operation between the Bank and relevant Chinese-speaking authorities and stakeholders. It is therefore our hope that the MOU we are signing today will assist in not only fostering stronger trade relationships between Zambia and China but to also avail our staff a multi cultural awareness which would assist them both in their official work and in developing their social networks. We also hope that staff will have opportunities for higher education in China and other South East Asian countries where the Chinese language is spoken. Allow me to mention here that, already three bank employees are currently pursuing Phd programmes in China under the Chinese Government scholarship programme. With the introduction of this initiative, it is my hope that more of our staff can be offered scholarships to study in China. In conclusion, let me appeal to the members of staff who will be enrolled on the programme to take the course seriously bearing in mind the resources that the bank is investing into this undertaking. To this effect I urge the human resources department to enrol employees who are committed to learning the language. I also wish to thank the Chinese International School in Zambia for accepting our proposal and we look forward to a further cooperation with other Chinese institutions in order to foster the relations of our two countries. Lastly, I want to thank you, Your Excellency, for finding time to witness this great occasion. I thank you all for your attention. | bank of zambia | 2,010 | 12 |
Opening remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Closing and Dissemination Workshop on Foreign Private Investment and Investor Perceptions Survey, Lusaka, 20 January 2011. | Caleb M Fundanga: Foreign private investment in Zambia Opening remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Closing and Dissemination Workshop on Foreign Private Investment and Investor Perceptions Survey, Lusaka, 20 January 2011. * * * The Deputy Secretary to the Cabinet, Mr Evans Chibiliti; The Deputy permanent Secretary at the Ministry of Works and Supply, Mrs Bweupe Kaonga; The MEFMI Executive Director, Dr Elias Ngalande; The IMF Country Representative, Mr Perry Perone; Heads of Government Departments present; Chief Executive Officers of various Companies and Associations present Colleagues from Bank of Zambia; Distinguished Participants; Members of the Press; Ladies and Gentlemen. It is my honour and privilege to officiate at this very important Closing and Dissemination workshop of Phase III of the Survey on Foreign Private Investment and Investor Perceptions. As I welcome you all, I wish to convey my appreciation for your contributions to the success of this project. May I, in this regard, express our special appreciation to the private sector colleagues for their cooperation during the survey. Let me also take this opportunity to extend my sincere gratitude to the Private Sector Development (PSD) Programme, for providing financial support for this very important project. Further, our thanks go to the Macroeconomic and Financial Management Institute (MEFMI), and Development Finance International (DFI) for providing technical support to this survey. With their technical support, the Government, through the Balance of Payments Statistical Committee, comprising representatives from the Ministry of Commerce, Trade and Industry, Ministry of Tourism and Natural Resources, Zambia Development Agency, Central Statistical Office and Bank of Zambia, was able to undertake this very important survey. Distinguished Participants, As you are aware, the Zambian economy has recorded significant positive developments in the recent past, owing to the economic reforms the Government has been implementing since 1992. These reforms have facilitated foreign investments in various sectors of the economy. These reforms have also resulted in Zambia recording tremendous improvement in world ranking with regard to the ease of doing business. The favourable investment climate created has raised investor confidence in the Zambian economy thereby attracting both local and foreign investments. Ladies and Gentlemen, the survey findings we are disseminating today show that the overall Foreign Private Investment inflows in 2009, declined to US $935.4 million from US $1,932.8 million recorded in 2007. This was explained mainly by the notable reduction in re-invested earnings, due to lower profits recorded by enterprises during the year. The overall reduction in foreign investment inflows is also consistent with global developments. In fact, at a global level, foreign direct Investment inflows drastically declined to US $1,114.2 billion in 2009 from US $1,770.9 billion in 2008 and US $2,100.0 billion in 2007. Nonetheless, new equity investment inflows in Zambia surged to US $419.2 million in 2009 from US $131.6 million recorded in 2007. The substantial increase in new equity investments, despite the effects of the global financial and economic crisis, demonstrates how favourable the Zambian investment climate is in attracting foreign investment. BIS central bankers’ speeches Distinguished Guests, It is also encouraging to note that the Government’s diversification efforts are yielding favourable results. The survey findings show that the concentration of foreign direct investment in the mining sector is reducing as evidenced by the substantial FDI inflows to other sectors such as manufacturing, wholesale and retail trade, and the tourism sector in 2009. Evidence from South East Asia and the recent global financial and economic crises show that high volatility in foreign private capital if not properly monitored and managed, can induce financial and macro-economic instability. In light of this the results of the Foreign Private Investment and Investor Perception Survey are important and intended to assist the Government to effectively monitor and manage these flows. In addition, better information on investor perceptions will assist Government in designing policies and programmes that will help enhance Zambia’s favourable investment climate. Further, the results of the survey should prove useful to the private sector and other stakeholders as they highlight some concerns which Government should address as well as the overall business profitability and performance prospects of various sectors. The importance of timely and reliable information on capital flows in the design of appropriate policy responses by Government and thus enhancing macroeconomic stability can hardly be overemphasised. Adequate and consistent information on capital flows will also greatly improve Balance of Payments Statistics for Zambia and serve as an early warning system for Government on potential financial crises and other external shocks. Mr. Chairman, Zambia has adequate technical capacity to collect, analyse and disseminate data and information on foreign private investment. It has, however, lagged behind in terms of the frequency of these surveys compared with some other countries in the region. For instance, while we are now at the third phase of the Survey, Uganda, Tanzania and Malawi are in their eighth, fifth and fourth phases, respectively. This only emphasises the critical need to conduct this enterprise survey more regularly. To this end, I wish to reiterate the Bank of Zambia’s, continued support and commitment in working in close collaboration with Government and other Balance of Payments Statistical Committee member institutions in ensuring that the collection of this vital information is done on an annual basis. Accordingly, it is my hope that participants at this workshop will appreciate the importance of this survey and find the results useful. Distinguished Guests, I am particularly happy to learn that compared to other countries in the region, the Zambian team has conducted this enterprise survey in record time. It shows true commitment and dedication of the team to this project. Please keep up the good work. Be reminded, however, that you have established a benchmark, which can only be improved on. I have no doubt that we will sustain the record we have set within the Macroeconomic and Financial Management Institute of Southern and Eastern African member countries. Ladies and Gentlemen, I am confident that this workshop will achieve its intended objective of disseminating the findings of the survey and stimulate active participation and comments from the various stakeholders. It is now my pleasure and honour to declare this Closing and Dissemination Workshop on Foreign Private Investment and Investor Perception Survey officially opened and wish you fruitful deliberations. I thank you. BIS central bankers’ speeches | bank of zambia | 2,011 | 1 |
Presented by Dr Caleb M Fundanga, Governor of the Bank of Zambia, Lusaka, 18 February 2011. | Caleb M Fundanga: Fourth quarter 2010 media briefing Presented by Dr Caleb M Fundanga, Governor of the Bank of Zambia, Lusaka, 18 February 2011. * * * Executive summary 1. This brief examines monetary policy implementation and its outcomes in the fourth quarter of 2010. The brief also reviews other economic and financial sector developments, and concludes with an inflation outlook for the first quarter of 2011. Monetary policy 2. The focus of monetary policy during the fourth quarter of 2010 continued to be the achievement of the end-year annual inflation target of 8.0%. In this regard, the Bank of Zambia utilised largely Open Market Operations to maintain reserve money within the programmed growth path. This was supported by the auctioning of Government securities. Inflation 3. Quarterly overall inflation increased to 2.5% in December 2010 from 1.6% in the third quarter, and was above the 2.3% recorded in December 2009. This outturn was mainly attributed to the rise in food inflation to 3.6% from –0.1% in the previous quarter, as non-food inflation slowed down to 1.5% from 3.2% during the same period. 4. Similarly, the annual overall inflation rate rose to 7.9% in December 2010 from 7.7% in September 2010, but was in line with the end-year target of 8.0%. This outturn was largely on account of the rise in annual food inflation to 4.4% from 2.8% in September 2010, as annual non-food Inflation decreased to 11.3% from 12.5% during the same period. 5. Food inflation increased mainly on account of price increases on cereals, selected vegetable, beef products, and fish due to seasonal supply factors. However, non-food inflation slowed down on account of the Kwacha exchange rate appreciation against the US dollar during the period under review. Money supply and domestic credit 6. Preliminary estimates indicate that broad money (M3), comprehensively defined to include foreign currency deposits, increased by 2.5% (September 2010, rose by 7.9%) to K18,477.0 billion in December 2010 from K18,018.4 billion in September 2010. This growth in M3 was below the quarterly projection of 3.2%. 7. The outturn in M3 was largely due to an increase in Net Domestic Assets (NDA) by 10.3% reflecting increased lending to Government. However, Net Foreign Assets (NFA) declined by 7.9% mainly on account of a 1.3% decrease in gross international reserves to US $2,093.7 million as at end-December 2010, coupled with 1.2% appreciation of the Kwacha against the United States dollar. 8. On an annual basis, M3 growth increased to 30.8% in December 2010 from 32.8% in September 2010. This outturn was due to the rise in NFA by 40.1% (September 2010, fell by 6.9%) primarily on account of an increase in gross international reserves. The NDA rose by a lower margin of 25.6% compared with the rise of 94.6% recorded in September 2010. BIS central bankers’ speeches 9. Domestic credit, comprehensively defined to include foreign currency loans, increased by 5.4% to K14,915.1 billion as at end-December 2010 (September 2010, growth of 3.1%) from K14,153.8 billion in September 2010. This outturn was mainly due to increased lending to the private sector (including public enterprises) and Central Government by 5.7% and 4.6%, respectively. On an annual basis, domestic credit growth at 22.9% was 9.4 percentage points higher than the 13.5% recorded in September 2010. 10. On a sectoral basis, households (personal loans category) continued to account for the largest share of outstanding credit, accounting for 26.8% [26.3%] 1 in December 2010. The agricultural sector was second at 17.6% [17.1%], followed by manufacturing 12.7% [13.4%], wholesale and retail trade 10.8% [12.0%], real estate 6.2% [5.4%], construction 5.8% [6.0%], transport, storage and communications 4.7% [5.3%], community, social and personal services 3.7% [2.5%] and mining and quarrying 3.2% [3.1%]. Interest rates 11. Yield rates for Government securities trended upwards, extending gains from the previous quarter as investors sought to consolidate positive returns over the inflation rate. Thus, the composite weighted average Treasury bill yield rate increased by 58 basis points to 8.2% while that for Government bonds rose marginally by 10 basis points to 11.3%. 12. The stock of Government securities outstanding increased by 5.6% to K9,940.9 billion at the end of the fourth quarter from K9,411.2 billion in the third quarter. This was mainly accounted for by an increase of 13% in the amount of Treasury bills outstanding against a modest growth of 0.2% recorded for Government bonds. Despite this, Government bonds accounted for the largest proportion of the outstanding total stock of marketable securities, contributing K5,439.4 billion (54.7%) to the entire portfolio. Total Treasury bills in circulation amounted to K4,501.5 billion, representing 45.3% of the total marketable securities outstanding. 13. Investment in Treasury bills held by non-residents increased to K497.0 billion from K8.8 billion in the third quarter. The increase reflected renewed confidence in short-term Government paper. Conversely, foreign Investment in Government bonds decreased to K127.9 billion from K150.5 billion recorded in the third quarter, due to net maturities. Collectively, total holdings of Government securities by non-resident was K625.4 billion, representing 7% of total securities outstanding. 14. Developments in commercial banks’ nominal interest rates continued to be mixed during the reviewed quarter, with the weighted average lending base rate (WALBR) trending downwards to 19.4% from 19.8% in September 2010. Similarly, the average lending rate (ALR) fell to 26.4% in December 2010 from 26.8% in September 2010. However, the 30-day deposit rate for amounts exceeding K20 million and the average savings rate (ASR) for amounts above K100,000 remained unchanged at 5.6% and 4.7%, respectively. Real sector 15. Developments in the real sector were satisfactory during the reviewed quarter. This was reflected by higher output of most monitored commodities, and an increase in investment pledges. Figures in square brackets are for September 2010. BIS central bankers’ speeches Food reserve agency stocks 16. The Food Reserve Agency (FRA) had 982,784 metric tonnes (mt) of maize in stock at end-December 2010, up from 162,956 mt at end-September 2010, out of which, total purchases from the marketing season amounted to 883,036 mt. The Agency also had in stock 4,508 mt of rice (1,794 mt; 30th September 2010), out of which, 3,647 mt was purchased during the 2010/11 agricultural marketing season. Major Millers maize stocks 17. The stock of maize grain held by major millers in the country fell by 10% to 91,655.9 mt at end-December 2010 from 101,807 mt at end-September 2010. In terms of holdings by province, Lusaka contributed 52,250 mt (57%), Southern 18,007.5 mt (19.6%), Copperbelt 12,200 mt (13.3%), Central 7,128 mt (7.8%), Western 2,000 mt (2.2%), and Northern 40 mt (0.04%), respectively, while Eastern province accounted for 30 mt (0.03%). Mining 18. During the fourth quarter of 2010, copper output fell by 13.5% to 197,500.2 mt from 228,369.7 mt produced in the previous quarter. Nonetheless, this output was 9.6% higher than the 180,188.2 mt of copper produced in the fourth quarter of 2009. On an annual basis, copper output at 819,159.2 mt was 17.4% higher than the 697,700.7 mt of copper produced in 2009. 19. Cobalt output rose by 1.5% to 2,401.79 mt during the fourth quarter of 2010 from 2,367.26 mt recorded in the previous quarter. This level of output reflected an increase of 26.7% when compared with the 1,896.24 mt produced in the fourth quarter of 2009. On an annual basis, cobalt output at 8,781.85 mt was 49.4% higher than the 5,879.14 mt of cobalt produced in 2009. The improvement in output was due to the resumption of production at Konkola Copper Mines and Chambishi Metals Plc. Manufacturing 20. During the quarter under review, production of clear beer by Zambian Breweries Plc increased by 6.2% to 237,458 hectolitres from 223,607 hectolitres the previous quarter. Further, this output was 46.7% higher than the 160,820 hectolitres produced in the corresponding quarter of 2009. On an annual basis, output of clear beer at 727,191.0 hectolitres was 27.6% higher than the 569,771.0 hectolitres of clear beer produced in 2009. 21. Similarly output of soft drinks by Zambian Breweries Plc rose by 28.8% to 163,848.0 hectolitres from 127,244.0 hectolitres in the previous quarter. Moreover, this output level was 45.3% higher than 112,722.0 hectolitres produced in the fourth quarter of 2009. On an annual basis, output of soft drinks at 561,910.0 hectolitres was 49.1% higher than the 376,747.0 hectolitres of soft drinks produced in 2009. 22. Production of milk by Parmalat Zambia Ltd during the quarter under review rose by 10% to 8,613,737.0 litres from 7,830,878.0 litres in the third quarter of 2010. Further, this output was 5.3% higher than 8,178,335.0 litres of milk produced during the fourth quarter of 2009. On an annual basis, output of milk at 32,456,505.0 litres was 8.2% higher than the 29,984,030.0 litres of milk produced in 2009. 23. Cement output increased by 26.1% to 359,966.0 mt in the fourth quarter of 2010 from 312,791.0 mt during the previous quarter. This outturn was attributed to a rise in cement production at Lafarge Cement and Oriental Quarries by 14.9% and 2.3% to 251,505.0 mt and 16,295 mt, respectively. Zambezi Portland Plc also increased its output of cement by 18.1% BIS central bankers’ speeches to 92,166.0 mt. Total output of cement for the year at 1,126,728 mt was 37.9% higher than the 817,223.0 mt produced in 2009. Tourism 24. During the quarter under review, international arrivals at the country’s four international airports 2 declined to 116,140 passengers from 124,244 passengers in the third quarter of 2010. However, this was 24.0% higher than 93,688 passengers recorded during the fourth quarter of 2009. Livingstone and Mfuwe international airports, which are the major tourist destinations, accounted for 20,590 passengers and 257 passengers compared with 21,272 passengers and 241 passengers in the previous quarter, respectively. 25. On an annual basis, international arrivals at the country’s four international airports increased to 679,172 passengers from 438,788 passengers recorded in 2009, representing an increase of 20.27%. Investment 26. Total investment pledges were estimated at US $1.0 billion in the fourth quarter of 2010 compared with US $110.4 million in the third quarter. On a sectoral basis, pledges in manufacturing were US $377.3 million, real estate (US $264.0 million), agro-processing (US $252.4 million), services (US $31.3 million), agriculture (US $25.3 million), tourism (US $16.7 million), construction (US $11.8 million), ICT (US $8.8 million), and mining (US $93.0 million). 27. The pledges when fully executed are expected to generate 22,532 jobs (1,726 jobs: third quarter 2010) with the highest contribution from services at 12,763 jobs followed by agro-processing at 5,860 jobs. The rest were manufacturing (1,882 jobs), construction (847 jobs), agriculture (397 jobs), tourism (343 jobs), real estate (247 jobs), ICT (157 jobs) and mining (14 jobs). 28. Investment pledges for the year 2010 increased by 138.6% to US $4,791.6 million from US $2,008.4 million recorded in 2009. Real Gross Domestic Product (GDP) 3 29. Preliminary estimates indicate that Gross Domestic Product (GDP) rose by 7.1% in 2010 from 6.4% in 2009. This outturn was well above the target of 5% announced by the Minister of Finance and National Planning in his 2010 Budget Speech. 30. The GDP outturn was largely attributed to the growth in the agricultural, construction and mining sectors. The 2010 agricultural harvest was the highest recorded in history, having produced over 2.8 million mt of maize; while the mining sector also benefitted from higher copper prices and production levels. The growth in the construction sector emanated from increased residential, commercial and public infrastructure construction projects across the country by both Government and the private sector. Lusaka, Livingstone, Mfuwe and Ndola. Preliminary estimates. BIS central bankers’ speeches Foreign exchange market 31. The Kwacha was firm against major traded currencies, backed by consolidation of macroeconomic gains and improved liquidity in the foreign exchange market. A sustained increase in the international price of copper to an average of US $9,127.4 per ton provided further support to the local currency. Thus, the Kwacha appreciated by 2.1% against the US dollar to an average of K4,731.52/US$ at the end of the fourth quarter. 32. The Kwacha also appreciated by 2.4% against the pound sterling to an average of K7,375.98/£ and by 1.1% against the euro to an average of K6,277.82/€. These gains were partially attributed to the lingering European debt crisis despite the bailouts extended to Ireland and Greece. In contrast, the Kwacha depreciated by 2.0% against the rand to an average of K691.22/ZAR. The South African currency was broadly stronger on account of higher price of gold and lower policy uncertainty after the Government clarified speculation on privatisation of public enterprises. 33. In terms of volume of transactions, commercial banks made spot purchases of US $1,417.2 million from the non-bank public against sales of US $1,213.3 million. This translated into net purchases of US $203.8 million in the fourth quarter. Commercial banks also made net euro and pound sterling purchases €9.2 million ₤0.3 million, respectively. However, banks recorded net sales of ZAR853.1 million in the fourth quarter, underpinning the continued demand for the South African rand. 34. The general improvement in the availability of foreign exchange necessitated the Bank of Zambia’s participation in the market. In this regard, the Bank recorded a net purchase of US $58.5 million compared with net purchase or sale of US $67.5 million in the third quarter. Balance of payments 35. Preliminary data show that Zambia recorded an overall balance of payments (BoP) deficit of US $71.1 million during the fourth quarter of 2010, compared to the surplus of US $330.2 million recorded in the third quarter of the year. This was largely due to the unfavourable performance in both the current account balance and the capital and financial account. 36. During the period under review, the current account surplus declined to US $390.6 million from US $399.1 million recorded the previous quarter, largely on account of a decline in the merchandise trade surplus and widening of the net income deficit. 37. The merchandise trade surplus declined by 9.2% to US $771.4 million in the fourth quarter of 2010, from US $849.6 million recorded in the third quarter, following an increase in imports, which outweighed the rise in exports. Merchandise export earnings, rose by 5.2% to US $2,040.9 million from US $1,939.2 million recorded in the previous quarter. This was due to an increase in metal exports earnings by 7.3% to US $1,728.5 million from US $1,610.2 million in the previous quarter. 38. Copper export earnings, at US $1,654.3 million, were 7.8% higher than US $1,534.9 million recorded during the third quarter of the year, reflecting an increase in the average realised price by 6.8% to US $7,380.92 per tonne from US $6,912.96 per tonne recorded in the third quarter. In addition, copper export volumes increased by 0.9% to 224,128.6 tonnes from 222,034.6 tonnes. 39. However, cobalt export earnings declined by 1.4 % to US $74.2 million in the fourth quarter of 2010 from US $75.3 million in the previous quarter. This followed a slide in the average realised price by 3.9% to US $32,165.02 per tonne from US $ 33,467.08 per tonne in the preceding quarter despite a rise in export volumes by 2.6% to 2,308.0 mt from 2,249.9 mt recorded in the third quarter. BIS central bankers’ speeches 40. Similarly, non-traditional exports (NTEs) f.o.b. fell by 5.1% to US $312.4 million from the US $329.0 million realised the previous quarter. This was largely due to declines in export earnings from copper wire, cotton lint, electrical cables, fresh fruits and vegetables, petroleum products and electricity. 41. In the period under review, merchandise imports, at US $1,308.4 million were 15.4% higher than US $1,134.3 million recorded the previous quarter. A surge in import bills associated with commodity groups, such as, food items, chemicals, iron and steel and item thereof and industrial boilers and equipment explained this outturn. 42. During the same period, the net income account deficit widened by 3.2% to US $381.3 million from US $369.3 million in the third quarter. This was largely on account of an increase in income on equity payments and interest payments. The current account transfers, increased to US $128.1 million from US $93.6 million recorded the previous quarter, explained by the disbursement of budget grants amounting to US $53.8 million. 43. The capital and financial account deficit widened to US $354.5 million from US $238.9 million recorded in the third quarter. This was largely due to the unfavourable performance of the financial account arising from a surge in short-term deposits abroad by the private sector, despite the increase in foreign direct investment. Developments in the financial sector 44. The overall financial condition of the banking sector for the quarter ended December 2010 was satisfactory. On aggregate, the banking sector’s capital position, asset quality and liquidity were satisfactory. However, the earnings performance of the sector declined largely on account of an increase in the non-interest expenses (due to increases in staff emoluments, reorganization costs and additional tax provisions). 45. Overall financial condition and performance of the Non-Bank Financial Institutions sector was rated fair during the quarter under review. The sector was adequately capitalised with “fair” asset quality, while earnings performance was rated “satisfactory”. 46. As part of the overall objective to enhance financial inclusion, the BoZ undertook provincial sensitisation tours on savings and credit covering all the nine provinces of Zambia. The tours focused on the following topical areas: – The role and functions of the BoZ; – The need to deal with licensed financial institutions; – Getting credit; and – The operations of a credit reference bureau. 47. The BoZ is planning to conduct the tours on a regular basis to address public misconceptions about the role of the BoZ in the financial sector. Future tours will also educate the public on how to detect genuine currency and how to invest in Government securities. The BoZ was requested to publish the names of licensed financial service providers in the print media on a more regular basis. Developments in banking, currency and payment systems 48. During the quarter under review, there was a continued improvement in the availability of electronic payment options. The number of Point of Sale (POS) terminals increased by 8.3% to 1,119 (third quarter 2010: 1,033). The volume of POS transactions also increased by 42.2% to 284,145 (third quarter 2010: 199,817). Similarly, the values of POS transactions increased by 32.6% to K113.9 billion (third quarter 2010: K85.9 billion). The BIS central bankers’ speeches Bank would like to urge members of the public to use Point of Sale terminals as they provide a more convenient, safer, efficient and cost effective way of making payments. 49. Further, the number of Automated Teller Machines (ATMs) increased by 4.5% to 489 ATMs (third quarter 2010: 468). The volume of ATM transactions also increased by 5.1% to 6,654,992 (third quarter 2010: 6,333,073). Similarly, the value increased by 17.1% to K3,397.3 billion (third quarter 2010: K2,897.6 billion). 50. The total volume of cheques returned unpaid on account of insufficiently funded accounts increased by 5.4% to 4,428 (third quarter 2010: 4,202) cheques while the value decreased by 8% to K36.2 billion (third quarter 2010: K35.3 billion). The Bank would like to urge members of the public to always ensure that they fund their accounts sufficiently whenever they issue cheques. This will ensure that they do not face criminal charges under the National Payment Systems Act for bouncing cheques dishonestly or with intent to defraud. Economic programme 51. A follow-up International Monetary Fund (IMF) Mission visited the country from 28th October to 3rd November 2010 to conclude discussions for the 5th Review under the Extended Credit Facility (ECF) arrangement. The mission had fruitful discussions with the Zambian authorities and reached agreement on a set of macroeconomic policies and structural measures for the remainder of 2010 and 2011. 52. The IMF Executive Board meeting was held on 10th December 2010 and completed the fifth review of Zambia’s economic programme. This resulted in the immediate disbursement of an amount equivalent to SDR 18.395 million (about US $28.3 million), bringing total disbursements under the ECF arrangement to SDR 201.7 million (about US $310.3 million). 53. The IMF mission commended the authorities for Zambia’s economic prospects that have continued to improve as well as for having sound macroeconomic policies. It also commended the authorities for the progress made in implementing structural reforms. However, the Fund noted that the main medium-term challenge remained that of creation of fiscal space for priority spending, enhancement of economic diversification and poverty reduction. 54. Total disbursed poverty reduction budget support (PRBS) in the fourth quarter of 2010 amounted to US $123.4 million from; the African Development Bank (US $49.8 million), European Union (US $43.8 million), Sweden (US $9.9 million) and Germany (US $9.9 million). This brought the total disbursed PRBS to US $227.4 million for the year against the projection of US $222.9 million. The variance of about US $4.5 million is largely attributed to exchange rate variations. 55. In addition, a total of US $35.0 million mining tax revenue was received from First Quantum Mining Plc, for the benefit of Government, while Bank of Zambia foreign exchange purchases from the market amounted to US $61.0 million during the period under review. The above receipts were against payments to PTA Bank (US $139.0 million) for oil procurement and debt service payments (US $44.5 million). Inflation outlook for the first quarter of 2011 56. Annual overall inflation is projected to remain above 8.0% during the first quarter of 2011, mainly due to the following factors: Seasonal increase in some food prices: During the first quarter of the year, there is seasonal low supply of selected food items including fish, fresh vegetables and BIS central bankers’ speeches Lagged effects of money supply growth in 2010: During the second half of 2010 there was a rapid increase in broad money by over 15.0%, largely due to lending to government for the purpose of purchasing maize following the bumper harvest. 57. However, the Bank of Zambia will continue to monitor developments and undertake appropriate monetary policy actions to ensure that monetary targets are achieved. To contain growth of money supply within the programmed path, Bank of Zambia will continue to employ open market operations and auctioning of Government securities. This is expected to be complemented by prudent fiscal operations. BIS central bankers’ speeches | bank of zambia | 2,011 | 2 |
Address by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Co-operative Bank Capitalisation Consultative Forum "The history and experiences of the financial sector and regulatory framework in Zambia", Lusaka, 3 March 2011. | Caleb M Fundanga: The history and experiences of the financial sector and regulatory framework in Zambia Address by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Co-operative Bank Capitalisation Consultative Forum “The history and experiences of the financial sector and regulatory framework in Zambia”, Lusaka, 3 March 2011. * * * The Honourable Minister of Agriculture and Co-operatives, Hon Eustarkio Kazonga, M.P; The Board Chairman of the Co-operative Bank Zambia Limited, Mr Mulilo Kabesha; Members of the Diplomatic Corps; Distinguished Invited Guests; Ladies and Gentlemen It is with great pleasure and privilege to speak to you at this very important Consultative Forum. I have been requested to speak briefly on the history and some of the experiences of the financial sector in Zambia. Ladies and Gentlemen, as you are aware, considerable developments have been recorded in the Zambia economy in general and the financial sector in particular, following the liberalization of the economy in the early 1990’s. These developments include the proliferation of banks and non-bank financial institutions, which have necessitated the review of supervisory policies as well as the legal and regulatory frameworks in order re-align them to the liberalised environment. A significant development relating to the Zambian financial sector was the decision to relocate the function of the Registrar of Banks and Financial Institutions to the Bank of Zambia from the Ministry of Finance and National Planning where it was previously located. This decision was taken in an effort to enhance regulatory oversight of banks and financial institutions starting from the licensing stage. Currently, all applicants have to be evaluated in line with relevant provisions of the Banking and Financial Services Act (BFSA) and international best practice such as the Basel Core Principles on Effective Banking Supervision. The intention is to ensure that only applicants who meet these stringent criteria enter the financial system in Zambia. This is crucial for fostering confidence and stability in the financial system. Mr Chairman, you may be aware that in the early stages of the reforms, a number of commercial banks faced serious problems and were subsequently liquidated. The closures were in part a consequence of the reforms. The reforms also highlighted some weaknesses in corporate governance arrangements at most failed banks. However, following improvements in the regulatory and supervisory frameworks, no bank closure has been recorded since 2002 and the banking sector has recorded significant growth. The growth in the sector can also be attributed to prudent fiscal and monetary policies aimed at achieving sustainable macroeconomic stability. This has been accomplished under a stable political environment and liberalised market conditions. Furthermore, in 2002, the International Monetary Fund and the World Bank undertook a comprehensive assessment of the Zambian financial sector through the Financial Sector Assessment Program (FSAP). In response to the weaknesses noted in the FSAP, Cabinet approved the Financial Sector Development Plan (FSDP) covering the period 2004 – 2009. Apart from addressing the weaknesses identified in the FSAP, the FSDP sought to further BIS central bankers’ speeches strengthen the Zambian financial sector as well as to guide efforts for realizing the vision of a stable, sound and market based financial system that would support the efficient mobilisation and allocation of financial resources necessary for economic diversification and sustainable growth. To this end, the Bank of Zambia in conjunction with the Government has been undertaken reforms in the financial sector under the FSDP, which is now in the second phase. Through the FSDP, the Bank of Zambia promoting competition among banks. Competition in the banking sector while desirable can have both negative and positive effects. In this regard, competition can be viewed in terms of being a public good which can significantly contribute towards access to better quality and cheaper financial services. The challenge, therefore, is to ensure that supervisory effort is adequately able to change and effectively respond to innovations and events in the financial system. It is expected that this would consequently promote confidence in the financial system which is necessary for insulating the economy from adverse internal and external shocks. The Bank of Zambia has attempted to develop supervisory and regulatory approaches which answer to these challenges. For instance, Bank of Zambia has adopted a risk-based approach to supervision. This approach entails closer interaction with banks and allows early identification of risk as well as close monitoring of the nature and direction of risks as they emerge. This paradigm shift in supervisory approaches requires a permissive legal and regulatory framework. Chairperson, currently, the legal and regulatory frameworks in Zambia comprise of the Banking and Financial Services Act, Chapter 387 of the Laws of Zambia; the Bank of Zambia Act, Chapter 360 of the Laws of Zambia; the Prohibition and Prevention of Money Laundering Act; the Bank of Zambia Anti-Money Laundering Directives; and the Bank of Zambia Corporate Governance Guidelines. In addition, the Bank of Zambia also issued Risk Management Guidelines to provide minimum standards to be observed by commercial banks in the area of risk management. The Bank has continued to revise these frameworks on an on-going basis to ensure that they address current challenges in the sector. However, the major challenge in this regard remains the extent and speed at which changes to these regulatory frameworks can be made in order to improve policy responsiveness. Ladies and Gentlemen, the Bank of Zambia has always strived to strike a balance between having a robust supervisory and regulatory framework and the need to promote investments in the sector. The entry of new players in the market is testimony of the confident that Bank’s supervisory oversight of the sector has instilled in both the general and investing public. We remain committed to executing our mandate and in ensuring that the financial system is properly regulated in order for economic agents to undertake their activities in a safe and sound environment. Distinguished guests, we note that financial intermediation is still very low in our economy and as such a lot of work still remains in this area. The Bank of Zambia encourages and supports market initiatives aimed at the financially excluded in order to achieve the objective on financial inclusion. It is therefore my view that promoting the initiative of reviving the operations of a Co-operative bank is important. As you are all aware, in a co-operative bank, shareholders and customers are the same group of people whose dominant purpose is to provide customer value by offering tailored-made products and services cost-effectively and close to home. Through their membership structures, Co-operatives are known to have a firm foothold in local communities and a sound knowledge of people’s overall financial situation. This enables accurate decision making and risk control which in turn, fosters regional development and social cohesion. Co-operative banks are also known for pioneering sustainable development and corporate social responsibility, through continuous engagement to fight unemployment and eradicate social exclusion. In fact, if properly managed, Co-operative banks can make the financial system more competitive. This can be BIS central bankers’ speeches done through proper organization, meaningful investment in technology and proper pricing of products. Lastly, let me remind all of us here that like any player seeking entry in the market, the cooperative bank which we wish to revive will be bound by the same legal, fiscal and prudential regulations as other players. It is therefore important for those who will be entrusted to manage the affairs of the institution to prudently provide leadership that seeks to promote the well being of all stakeholders. As such the aspect of good corporate governance practices in the banking and financial services sector cannot be over-emphasized. I thank you all for your attention! BIS central bankers’ speeches | bank of zambia | 2,011 | 3 |
Official opening remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at a roundtable symposium on small-scale cross-border trade and payment services in southern Africa, Lusaka, 21 March 2011. | Caleb M Fundanga: Small-scale cross-border trade and payment services in southern Africa Official opening remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at a roundtable symposium on small-scale cross-border trade and payment services in southern Africa, Lusaka, 21 March 2011. * * * Distinguished Invited Guests Let me begin by welcoming you to this Roundtable Symposium on Small-Scale CrossBorder Trade and Payment Services in Southern Africa. May I also warmly welcome our colleagues from neighbouring countries who have come to join us in this important event. It is my sincere hope that you shall enjoy your stay in Zambia and that you shall find this roundtable symposium fruitful. Distinguished Ladies and Gentlemen, cross-border trade plays an important role in supporting livelihoods, especially those of border communities, thereby buttressing prosperity in the region. Furthermore, by strengthening commercial ties, promoting cultural understanding, and deepening community relationships, cross-border trade helps to nurture harmonious relations amongst countries in the region. The unique feature of small-scale cross-border trade lies in geographical proximity which minimises transportation costs, thereby allowing traders to take advantage of differences in the supply, demand, and prices of various goods and services available on either side of the border. It is worth noting that most cross-border trade activities are not reported in foreign trade statistics. However, surveys conducted on the subject show that cross-border trade is carried out by individuals or small traders and their families. The volumes traded are small both in value and quantity, with agricultural products and consumer goods being the main traded goods. The traders’ mode of transport in conducting their business is on foot, using bicycles, taking a minibus or a taxi to and from the other side of the border. Ladies and Gentlemen, cross-border trade not only benefits traders’ lives through incomes but also strengthens local production, and fosters service provision. It also benefits the people involved in activities associated with trading. This entails that cross-border trade is a significant driver of employment and income generation for households that would otherwise have lived in poverty, especially in remote areas where employment is scarce. Furthermore, Ladies and Gentlemen, cross-border trade lowers import prices and widens the range of choice of goods available to consumers, as well as enables exporters to benefit from higher value-addition. Finally, cross border trade has a gender dimension with women being more actively involved. From the foregoing, Distinguished Ladies and Gentlemen, it is very clear that small-scale cross-border trade plays a very vital role in our economies, particularly in generating income, creating employment and alleviating poverty. However, Ladies and Gentlemen, the small-scale cross-border trade faces a lot of barriers and impediments, including lack of access to financial and payment services such as currency exchange and transmission facilities. Traders from both sides of the border are forced to carry cash and must first convert funds into United States Dollars from their respective countries and then into the domestic currency of the country they are purchasing goods or services from. By so doing, cross-border traders face many risks including theft, exchange losses and other conversion costs. Ladies and Gentlemen, although there have been some bilateral efforts towards formalising and facilitating small-scale cross-border trade in Southern Africa, these have not been BIS central bankers’ speeches enough. For instance, Zimbabwe signed a memorandum of understanding with Malawi to facilitate informal trade, especially between small and medium-sized enterprises. Mozambique and Zambia also signed a memorandum of understanding to facilitate the repatriation of currencies of the two countries that are accumulated by traders located along the common border areas. It is expected that this memorandum of understanding will be expanded to include Malawi. The lack of financial and payment services has not only hindered small-scale cross border trade but also led to the establishment and entrenchment of parallel currency markets at the borders. Needless to say, these are associated with vices such as counterfeiting, facilitating illegal trade, as well as enhancing cross-border money laundering activities. Moreover, to us monetary authorities, illegal cross-border local currency circulation creates the potential for complicating the conduct of monetary policy, especially if a significant amount of a country’s domestic currency is being used outside its jurisdiction. The volumes of goods and services traded and amount of currency handled by individual traders may seem small. However, they are collectively significant and have implications for the conduct of monetary policy. For instance, the World Bank estimates small-scale border trade in Southern Africa to be around $17.6 billion. Other studies have estimated that small-scale cross-border trading accounts for about 42% of GDP in Sub-Saharan Africa. Ladies and gentlemen, it is for this reason that this roundtable symposium has been convened with the following objectives: 1. To stimulate broader interest in the topic of small scale cross border trade; 2. To initiate an inquiry into the design of a World Bank project aimed at fostering small scale trade and innovative cross-border payment services in Southern Africa; and 3. To look at the opportunities for providing cross-border money transmission services that benefit both small-scale trade and remittance transfers. It is anticipated that this roundtable symposium shall come up with a refined design of the World Bank project to be launched later in 2011 focusing on five countries in Southern Africa, namely: Angola, Malawi, Mozambique, South Africa, and Zambia. A draft copy of the project design has been circulated to you all. The project will aim at enhancing trade through lower transaction costs for trade payments and improved access to financial services for smallscale traders. The goal is to increase small value trade payments through formal channels and transition payments away from cash by improving competition and innovation in the market for trade related payment services. It is also expected that the forum will result in attaining better alignment of project scope with stakeholder needs, and in particular buy-in from both private and public sector stakeholders in each country covered. Ladies and Gentlemen, this roundtable forum brings together some decision and policy makers, from both the private and public sectors of the countries covered by the project, to a single regional event representing government and central bank officials, trade and payment system experts, international development community, mobile network operators, international money operators, payment service providers, academics and researchers involved in the topics of small-scale cross-border trade and payment services. I am very positive that the symposium shall achieve the stated objectives and wish to encourage you to actively and freely participate in the deliberations. With these few words, Ladies and Gentlemen, I declare this roundtable symposium open. Thank you! BIS central bankers’ speeches | bank of zambia | 2,011 | 3 |
Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Institute of Directors Business Luncheon on Corporate Governance and its Impact on Financial Institutions, Lusaka, 27 April 2011. | Caleb M Fundanga: Corporate governance and its impact on financial institutions Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Institute of Directors Business Luncheon on Corporate Governance and its Impact on Financial Institutions, Lusaka, 27 April 2011. * * * The Institute of Directors National Vice President Mrs. Sue M. Mwaanza The Chairman Membership and Publicity Committee, Mr. Augustine C. Seyuba Directors and Chief Executive Officers Present Distinguished Invited Guests Members of the Press Ladies and Gentlemen I am honoured to be here today to share with you some thoughts on Corporate Governance and its Impact on Financial Institutions. I am certain that Corporate Governance is not a new topic to all of us in this room. It is obviously of fundamental importance to this audience, given that most of you are company directors. Corporate Governance is critical to the Bank of Zambia, in its capacity as supervisor and regulator of the banking system. Until fairly recently, corporate governance was not a topic that attracted much public attention. It was a topic reserved for discussion in the Board room or in academic environments. However, recent events, such as the Enron scandal and other corporate governance failures including events that led to the recent financial crisis, have made corporate governance a major topical issue. The recent events have highlighted the important role that corporate governance plays in a modern financial sector and the economy at large. I am therefore delighted that the Institute of Directors has chosen this topic for discussion today. Perhaps it would be useful to begin by defining what corporate governance means. There is no single, accepted definition of what “corporate governance” means. The majority of the definitions employed by corporate practitioners relate corporate governance to “control” of the company. In this regard, corporate governance is defined as a set of processes, customs, policies, laws and institutions affecting the way a corporation is directed, administered or controlled. Corporate governance influences how the objectives of the company are set and achieved, how risk is monitored and assessed and how performance is optimised. Ladies and Gentlemen, corporate governance is of key importance to any financial system. In Zambia the financial sector is dominated by banks and these remain the main source of finance in the economy. The failure of corporate governance in banks may therefore pose serious consequences for the banking sector and the economy as a whole. It is also important to note that the health of the financial system largely depends on their capacity to identify measure, monitor and control their risks. Banks face a wide range of complex risks in their day to day operations, including risks relating to credit, liquidity, exposure concentration, market risks, settlement, and internal operations. The nature of banks’ business particularly the maturity mismatch between their assets and liabilities, their relatively high gearing and their reliance on creditor confidence creates particular vulnerabilities. The consequences of mismanaging their risks can therefore be very severe not only for the individual bank, but also for the system as a whole. Chairperson, it must further be noted that Banks are highly leveraged institutions, funding their assets largely from customer deposits. Banks must therefore be accountable to their BIS central bankers’ speeches depositors. The failure of a bank can therefore result in monetary loss for depositors. The interests of depositors must therefore be protected. It is for this reason that corporate governance for banks and other financial institutions is crucial and therefore the boards of directors and management of banks have to pay particular attention to the interests of depositors and other creditors. The Basel Committee on Banking Supervision states that “effective corporate governance practices are essential to achieving and maintaining public trust and confidence in the banking system, which is critical to the proper functioning of the banking sector and the economy as a whole. Poor corporate governance may contribute to bank failures, which in turn can pose significant costs on the treasury and can have other macro-economic effects like contagion risks. Additionally poor corporate governance can lead to financial markets to lose confidence in the ability of banks to properly manage their assets and liabilities, including customer deposits, and this could in turn trigger a run on a bank or precipitate a liquidity crisis. Furthermore, effective corporate governance is also crucial for banks since it enhances transparency. Ownership structures of banks in Zambia are varied with some banks being foreign owned, others owned by private entities while others have some degree of state ownership. Each type of ownership structure poses governance challenges. In all instances, transparency and fairness in banks’ lending and investment decisions, becomes a critical requirement. Banks also operate on the basis of trust and therefore reputation risk becomes a critical factor that can affect a bank seriously if not properly managed. For this reason, banks need to adopt good governance practices and customer services standards in order to build public confidence in the credibility of their operations. It must be remembered that banks operate in a volatile environment where perceptions in their dealings could trigger a run on a banks’ deposits. For instance some of you in this room may remember that in 1997, First Merchant Bank Zambia Ltd, experienced a run and was subsequently closed two days later after a local newspaper reported that a customer of the bank was involved in money laundering. Ladies and Gentlemen, the importance of the payment system to an economy cannot be over-emphasized. The payment system provides the means by which vast numbers of transactions are made each day. The payment system involves many different components, including systems for settling large, inter-bank and inter-corporate payment transactions, and systems for handling a number of smaller transactions. However, the payment system operators also face a number of risks including operational risks. In particular, they need to ensure that the systems for processing payments, the back-up arrangements, and the internal governance structures are robust. A major operational failure in the payment system has the potential to cause severe disruption to the financial system and wider economy. At its worst, a major payment system failure would bring countless commercial transactions to an abrupt halt, impede the operation of business in virtually all parts of the economy and fundamentally undermine investor and business confidence. It is thus imperative that banks and other financial institutions as well as payment system operator maintain proper systems to enable them to identify, monitor and control risks. Sound corporate governance is the foundation for effective risk management. The recent financial crisis has shown that the presence of a well regulated financial sector and properly run corporate entities is key to the prosperity of any economy. In particular, the crisis was caused, in part, by excessive exposure concentration, poor credit policies and inadequate management of credit risk. These risk management failures reflect a breakdown in corporate governance. They reflect poor management of key banking risks, and poor oversight by boards of the mechanisms for managing their banks. In some cases, a lack of independent directors on the boards of banks was also a significant factor in weakening the effectiveness of boards with poor quality financial disclosures and ineffective external audit. BIS central bankers’ speeches In Zambia, although the financial sector was not adversely affected by the crisis in a direct fashion, over the period 1995–2000, the sector experienced numerous episodes of bank failures that have had adverse effects on the confidence in the financial system. A total of ten banks were closed during this period and a major weakness noted in all the failures were the weak governance structures and practices in the banks. A close examination of the failed banks identified the following weaknesses which were common in most of them; large credit exposures, lending to connected parties, poor or absence of a credit policy, incompetent management coupled with ineffective boards, foreign exchange exposures and an absence of or inadequate risk management frameworks. In other banks, the board chairman was also the majority shareholder and the chief executive of the bank. Such basic risk management failures, to a large extent reflect a breakdown in corporate governance. Chairperson, you may wish to note that the Zambian Banking system is stronger and properly regulated today than it was in the 1990s. The Bank of Zambia has been periodically reviewing the Banking and Financial Services Act (BFSA) to bring it up to date with international standards and current global practices. One of the areas the Banks has continued to strengthen is the corporate governance provisions to ensure that the board of directors and senior management of banks and financial institutions conduct the affairs of their institutions prudently. In particular Chapter III, Part III and IV of the BFSA deal with the boards of directors of banks and financial institutions. Under these parts: Every bank or financial institution is expected to have a board of directors in which shall vest all the powers of management and control and which shall be responsible for the formulation of policies of the bank or financial institution (Section 30(1); The Board of directors shall consist of not less than 5 members (Section 30(2); Every financial service provider must have a Chief Executive Officer and Chief Financial Officer who shall not qualify to hold office unless it is shown that; they are fit and proper persons, above 21 years old, have not been convicted of a felony or offence involving dishonesty, are not mentally incompetent, have never been removed from office under the BFSA, have not managed a company that has gone into liquidation or entered into a composition with creditors (Section 31); The majority of directors must be from outside the bank (Section 32(1); Directors, Chief Executive Officers and Chief Financial Officers are expected to act honestly, in good faith and in the interest of the company whilst exercising due care, diligence and skill (Section 33); A director is required to declare in writing to the board annually, the names and addresses of the director’s associates and full particulars of every material interest (Section 35); A director who (a) negligently or with intent to deceive, makes any false or misleading statement or entry or omits any statement or entry that should be made in any book, account, report or statement of the financial service provider, or (b) obstructs or endeavours to obstruct (i) the proper performance by an auditor of the auditor’s duties in accordance with this provisions of this Act; or (ii) a lawful inspection of the service provider by a duly authorised inspector appointed by the Bank of Zambia, commits an offence and is liable on conviction to a fine or to imprisonment (Section 36). In addition to the provisions of the BFSA, there are a number of regulations in place that are aimed at enhancing corporate governance for the Financial Service Providers regulated by the Bank of Zambia, some of which are listed below; The Prohibition and Prevention of Money Laundering Act of 2001 (PPMLA) and the Anti-Money Laundering Directives obligate the board of directors to formulate anti BIS central bankers’ speeches money laundering policies and ensure senior management implement these policies. The Corporate Governance Guidelines for Financial institutions issued in November; 2006. These guidelines set forth a broad framework of fundamental corporate governance principles to guide the actions of the directors and managers of the institutions operating in Zambia. (Infact, in every letter authorizing the appointment of directors of financial institutions, the Registrar of Banks and Financial Institutions makes reference to these guidelines). Chairperson, we are also aware that the mission of the Institute of Directors is to ensure the highest professional and ethical standards amongst directors and the boards on which they serve. Similarly, the Bank of Zambia scrutinises all persons proposed for appointment as directors and senior management as a way of ensuring that only people who are credible, fit and proper are allowed to manage affairs of financial institutions. In cases where a serving director or senior manager of a financial institution falls short of the expected standards of conduct, the Bank of Zambia has powers to cause their removal from such positions. Ladies and Gentlemen, another important safeguard relates to the requirement for financial institutions to have in place certain board committees such as the Audit, Risk Management and Loans Review Committees. This is intended to ensure independence, transparency and accountability to board oversight over management actions. All companies should strive to ensure that such safeguards are put in place for the effective oversight of management. Finally, allow me to congratulate the Institute of Directors for continually trying to improve professionalism and ethics in our corporate entities. This is commendable. I also wish to acknowledge the mutual cooperation that has always existed between the Bank of Zambia and the Institute of Directors. You will recall that the Institute of Directors conducted a number of seminars on core principles of corporate governance under the first phase of the Financial Sector Development Plan (FSDP). Similarly, it is our expectation that we will continue to work together under the second phase of the FSDP in the area of developing and introducing an ethics and corporate governance code for the financial sector. I Thank You For Your Attention BIS central bankers’ speeches | bank of zambia | 2,011 | 5 |
Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the official lunch of the Transparent Pricing Initiative in Zambia, Lusaka, 6 June 2011. | Caleb M Fundanga: Transparent pricing initiative in Zambia Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the official lunch of the Transparent Pricing Initiative in Zambia, Lusaka, 6 June 2011. * * * The Vice President, Global Programs Microfinance Transparency, Ms Alexandra Fiorillo; The President of the Association of Microfinance Institutions of Zambia (AMIZ), Dr. George Mulomboi; Executive Secretary of Association of Microfinance institutions of Zambia, Mr Webby Mate; Chief Executives and Representatives of Microfinance Institutions; Colleagues from Bank of Zambia; Distinguished Invited Guests; Members of the Press; Ladies and Gentlemen I would like to thank MicroFinance Transparency and the Association of Microfinance Institutions of Zambia for inviting me to officiate at this important workshop on Transparent Pricing. I also wish to welcome our visitors from outside the country. I hope you will enjoy the wonderful Zambian weather. Madam Vice President, the importance of microfinance to an economy cannot be overemphasised. The provision of financial services to the majority of people and the small and medium enterprises who have traditionally been excluded from the formal banking sector is a key element to poverty reduction and economic development. Mr President, as you are aware, in Zambia, the recent FinScope Survey confirmed that levels of access to financial services continue to be low with only 37.3% of Zambia’s adult population reported to have access to a financial services. The survey however showed that the number of people accessing microfinance was on the increase. The role that microfinance institutions play in financial inclusion is therefore very crucial. Over the years, the microfinance institutions in Zambia have played a significant part in the provision of financial services, particularly for low-income households. Although access to finance remains low, microfinance institutions have had a somewhat positive impact on the economic activity of low income households, in both urban and rural areas. I am hopeful that the microfinance sector will continue to bridge the financing gap especially to the unserved population. However, the Bank of Zambia continues to receive a number of customer complaints on the high cost of micro loans in the country. It has been observed that the interest rates charged by some institutions exceeded 300% per annum in some cases. Furthermore, in most instances the effective rate of interest and other charges are not disclosed to the customers resulting in them paying much more that what was initially publicised to them. This has raised ethical questions regarding transparency and the role of microfinance institutions in poverty alleviation and economic development in Zambia. In addition, although, the interest rates of microfinance loans may vary significantly relative to the duration and size of the loan, it is incumbent upon all microfinance institutions to provide clear information on the cost of the loans and options available. It is also important for institutions to sensitise customers on what products may best suit their incomes and to educate them to borrow prudently. It is therefore, imperative that all institutions provide the price of their loans in terms of the Annual Percentage Rate rather than a monthly percentage. In this way, transparency is enhanced and consumers would have a clear BIS central bankers’ speeches picture of precisely how much they need to borrow relative to their income levels. This would result in responsible lending and a more competitive and transparent microfinance industry. It is in this regard that the initiative on transparent pricing for the microfinance sector in Zambia could not have come at a more opportune time. I am informed that the Transparent Pricing initiative will offer training on transparent pricing and collect and publish data on the prices of microloans offered in Zambia. This initiative will complement the Bank of Zambia’s effort of enhancing transparency through the quarterly publication of financial charges, fees and commissions for accounts and other general services and transactions applied by financial service providers. In addition, the workshop has come at a time when the Bank of Zambia is conducting a study on “How Microfinance Institutions Determine Lending Interest Rates in Zambia”. The deliberations from this workshop will be of great benefit to the Bank and will provide valuable insights into the factors affecting interest rates in Zambia. Distinguished Ladies and Gentlemen, one of the reasons advanced by microfinance institutions to explain the high interest rates charged for their services in the past has been the high risk of default and lack of credit information on the borrowers. However, with the credit reference bureau now operational, to which I believe most of these institutions subscribe and access credit information on their borrowers, it is expected that the levels of delinquencies that the sector used to suffer through the non-repayment of loans by customers would decline. I therefore, implore all microfinance institutions to comply with the Bank of Zambia Directive of December 2008 regarding the use of the credit reference system and submission of credit data. I must emphasise that regulatory action will be taken against defaulting institutions. As I conclude, allow me to further urge microfinance and other financial institutions to continue revising their interest rates and charges in tandem with the movements in key macroeconomic indicators such as inflation. I am conscious to the fact that all microfinance institutions are in business and are therefore expected to make profits. However, making super profits at the expense of the poor and vulnerable is regressive to economic development. There is a need to make financial services more affordable to the majority of our people as well as small enterprises in order to expand their operations, employ more people, and thereby provide an impetus to significantly reduce poverty levels in the country. Let me, once again, extend my gratitude to MicroFinance Transparency and the Association of Microfinance Institutions of Zambia for inviting me to officiate at this launch of the Transparent Pricing Initiative in Zambia. It is now my honour and privilege to declare the workshop on Transparent Pricing officially opened. I thank you for your attention. BIS central bankers’ speeches | bank of zambia | 2,011 | 6 |
Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the official launch of the BancABC Central African Stock Exchange Handbook, Lusaka, 26 July 2011. | Caleb M Fundanga: Developing Zambia’s Stock Exchange Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the official launch of the BancABC Central African Stock Exchange Handbook, Lusaka, 26 July 2011. * * * The Chief Executive Officer of ABC Holdings - Mr Douglas Munatsi The Managing Director of BancABC Zambia Limited - Mr Dana Botha The Managing Director of Lusaka Stock Exchange - Mrs Beatrice Nkanza Management and Staff of BancABC Chief Executive Officers and Representatives of various Institutions present; Distinguished Invited Guests; Members of the Press; Ladies and Gentlemen. Let me begin by thanking the management of BancABC for inviting me to this occasion, which marks the official launch of the “Central African Stock Exchange (CASE) Handbook”. I also wish to thank the Managing Director of BancABC, Mr Dana Botha, for sending me a copy of the CASE handbook. The handbook provides a snapshot of various company financial results, share price performance and volumes traded in 2010. The handbook also highlights basic information on investment and borrowing options, which will not only assist investors diversify their portfolios but also assist in reducing transaction costs in our stock market. Ladies and Gentlemen, The stock market is an important avenue for harnessing resources for the financing of development in our country. Stock Markets enable firms to acquire the much needed capital at relatively lower cost, hence facilitating capital allocation, investment and growth. The stock market also plays a resource mobilisation role by encouraging savings through the purchase of equities that meet investors risk preferences and liquidity needs. The provision of information on the stock market and its activity such as contained in the CASE handbook is therefore one way of promoting investor awareness and participation on our local market. This will no doubt enhance the development of the stock exchange and its contribution to our economy. Chairperson, as you may be aware, the Government of the Republic of Zambia has been implementing a comprehensive Financial Sector Development Plan (FSDP) since 2004, whose main objective is to broaden and deepen the financial sector in Zambia. Under the FSDP, the need for a well-developed capital market as an engine for economic development is emphasised as it among other things would enable investors have access to a wide range of investment options. It is for this reason that the Bank of Zambia together with stakeholders introduced a number of initiatives aimed at further developing the capital market. This includes the introduction of long term Government bonds, which among other purposes, was aimed at providing an appropriate platform for pricing corporate bonds. Furthermore, the Bank of Zambia in collaboration with LuSE and Bankers Association of Zambia is in the process of extending the services of RTGS to settle stock exchange transaction. Another welcome development to the capital market is the recent B+ sovereign rating assigned to the country, as well as, the reclassification of Zambia as a low middle income country. These developments reflect the country’s recent strong economic performance. As BIS central bankers’ speeches you may be aware, GDP growth has averaged above 6% over the last five years, supported by low inflation and a positive external sector performance. These favorable developments put the Zambian business community and Government in a strong position to access finance for sustained economic growth and improved living conditions of all citizens. Ladies and Gentlemen, in the medium to long-term the prospects for Zambia’s economy are bright. The robust GDP Growth momentum is expected to be maintained premised on favourable growth performance in mining, agriculture, construction, tourism, manufacturing among other sectors. This will be supported by favourable commodity prices on the international market, Government’s investment in infrastructure and expected increases in foreign direct investment. Further, inflation is expected to remain in single digits owing to prudent macroeconomic policies and the bumper harvest recorded during the 2010/11 harvest season which is expected to dampen any negative effects on overall inflation through the food component. Accordingly, interest rates are expected to decline further. In addition, the macroeconomic environment is expected to remain favourable due to a projected strong external sector performance. In this regard, the capital market has an important role to play. I wish therefore, to commend BancABC for sponsoring the CASE Handbook, which I am sure will provide valuable information to active and potential players on the Stock Market in Zambia. With these remarks, I wish to declare the CASE handbook officially launched. I thank you for your attention. BIS central bankers’ speeches | bank of zambia | 2,011 | 7 |
Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Zambia International Trade Fair Symposium on "Innovative financial products on the Zambian market in relation to credit interest rates and the private sector development", Ndola, 30 June 2011. | Caleb M Fundanga: Innovative financial products on the Zambian market in relation to credit interest rates and the private sector development Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Zambia International Trade Fair Symposium on “Innovative financial products on the Zambian market in relation to credit interest rates and the private sector development”, Ndola, 30 June 2011. * 1.0 * * Introduction Financial development contributes to economic growth in a very significant way and it has been demonstrated that countries with more developed financial systems tend to grow faster. Therefore, the financial sector is key to economic development and policies aimed at developing the sector would be expected to contribute to economic growth. 2.0 The current financial sector policy environment in Zambia During the 1970s and 1980s Zambia pursued a policy of fixing interest rates for long periods and at relatively low levels, with the ostensible purpose of promoting growth. However, these administrative actions introduced economic distortions into the financial structure of the economy including the following: The hindrance to economic growth arising from the inefficiency in the allocation of resources (with credit controls and distorted price indicators). These controls resulted in both low levels of domestically generated savings and investment, thereby reducing the economy’s growth rates. The financial system remained generally under-developed with inefficient lending patterns that failed to achieve their distributional goals. With interest rates set at low levels, financial repression curtailed domestic resource mobilization thus making the economy dependent on foreign savings as reflected in huge foreign debt at the time. Low interest rates provided an incentive for fiscal indiscipline as the government obtained almost zero-interest-denominated resources to finance its deficit. In the state-owned banking sector, poor lending decisions (often politically influenced) and low repayment rates ultimately led to large budgetary bailouts. In the face of high inflation rates and fixed nominal interest rate, real interest rates remained negative for the larger part of the period, leading to low domestic savings and other forms of capital flight. A growing awareness of these economic costs led to financial “liberalization” as the dominant policy paradigm. Zambia embraced financial-sector liberalization policy prescription and embarked on a fairly ambitious reform program. This program entailed a variety of measures including the liberalization of interest rates; the establishing of the freedom and the procedures for entry into and orderly exit from the financial sector; the reduction of commercial banks’ reserves and liquidity requirements; the elimination of credit allocation directives; the elimination of preferential credit at concessional interest rates; the liberalization of the exchange rate; and the removal of controls on the current and capital accounts of the balance of payments. Due to liberalisation, the banking environment in Zambia has become competitive as banks compete for the share of the customer deposits and good quality credit. Prior to 2005, the banking industry’s balance sheet was largely concentrated in Government Securities. This was because Government Securities offered highly attractive yield rates (with zero credit risk) compared to other asset classes. Recently Government has maintained prudent fiscal BIS central bankers’ speeches policies and has reduced its borrowing to 1.8% of GDP leading to a significant fall in Government Securities yield rates. The reduction in yields rates on government securities has made it increasingly difficult for banks to sustain their profitability. Therefore, in order to remain profitable, banks have had to become innovative and resorted to riskier banking activities. This resulted in a shift in the asset structures of most banks from government securities holdings to an expanding loan portfolio, which offers higher returns. 3.0 The role of financial innovation in promoting the private sector Innovation can generally be defined as a continuous process where enterprises and individuals seek new and improved products, processes, and organisation structures in order to reduce costs of production, better satisfy customer demands, and yield greater profits for themselves. When specifically referred to banks and other financial institutions, innovation, commonly is known as financial innovation, refers to any change in the scale, scope and delivery of financial services. Financial innovations can therefore be grouped as new products (e.g. adjustable rate mortgages; personal loans); new services (e.g., internet banking); and new production processes (e.g., electronic record-keeping for securities; credit scoring); or new organisational forms (e.g., Internet-only banks). Whereas the need for better risk management has been the main driving force behind the recent wave in innovation in more advanced financial markets, this is not the case in less developed markets. The drive towards financial innovation in some instances can largely be attributed to the need to improve or maintain profitability. When talking about financial innovation, an important aspect that one needs to consider is whether or not the process is resulting in a reduction in the cost of doing business and providing banking services, on one hand, and whether it is translating into better pricing, on the other hand. We should therefore, not be surprised that innovation does not always yield the expected benefit of reduced prices. Innovation is clearly an important phenomenon of any sector of a modern economy. Successful financial innovation must reduce costs and result in the provision of improved services and affordable financial resources to users, particularly to the productive sector. A low level of innovation and development in the financial sector produces a weak impact of financial intermediation on economic growth. The right kind of innovation obviously would help the financial sector fulfill its core functions; and if the financial sector fulfilled its functions better and at lower cost, it would almost surely contribute to growth and societal well-being. It is essential to realise that for the most part, the financial system is not an end in itself but a means to an end and the measure of the success of the financial system must relate to its success in accomplishing broader societal functions. Innovations in the financial system that help it perform these tasks better and at lower cost almost surely lead to increased societal well-being, and to the extent that our GDP measures capture these benefits, in higher measured growth. Notwithstanding the benefits of innovation, it is important to note that the opening up to new activities and products, particularly the expansion of the credit portfolio, brings in a myriad of new risks associated with the new activities. Studies have shown that increasing financial innovation and deepening of financial markets brings with it challenges and risks, which if not well addressed, can threaten the health of the financial system and may cause havoc to the stability of a financial system. BIS central bankers’ speeches 4.0 The role of the Bank of Zambia in promoting innovation and competition The Bank of Zambia (BoZ) acknowledges that a stable, sound and efficient financial sector has to be underpinned by infrastructure development. The BoZ achieves this by creating an enabling environment through the legal and regulatory frameworks that promote financial systems stability and development. The BoZ also regulates the conduct of the banks to ensure that players in the sector have a level play-field in order to safeguard the interests of both investors and customers of the banks. It is against this background that one of the key functions of the Bank of Zambia is to regulate the activities of banks and financial institutions so as to promote safe, sound and efficient operations of financial institutions and the development of the financial system. In 2004 the BoZ and the Government in consultation with other stakeholders, formulated the Financial Sector Development Plan (FSDP), which is a long term vision and development strategy aimed at addressing major constraints to the development of the financial sector. Among the constraints that the FSDP seeks to address is high cost of banking services and unattractive interest rates, low savings, insufficient access to financial services by the vast majority especially in rural areas, insufficient access to credit, lack of long term credit, etc. The vision of the FSDP is to develop a stable, sound and market-based financial system which would support efficient mobilisation and allocation of resources necessary for economic diversification, sustainable growth and poverty reduction. The FSDP, which is currently in its second phase of implementation, has three components, namely: – Increasing Market infrastructure; – Increasing Competition; and – Access to Finance. Over the years, the number of financial institutions under the supervisory ambit of the BoZ has increased significantly. In 2008, the Bank of Zambia issued banking licences to 5 new banks to operate in Zambia. As at 31 May 2011, Institutions under Bank of Zambia supervision as at 31 May 2011 were: 18 commercial banks, 10 leasing finance companies, 3 building societies, 51 bureaux de change, 1 savings and credit bank, 1 development finance institution, 26 microfinance institutions (MFIs) and 1 credit reference bureau (CRB). The sector has also recorded tremendous growth in business with growth witnessed in various innovative activities carried out by the banks in order to meet the needs of increasing number of customers. Some of the innovations include: An increase in automated teller machines (ATMs) including deposit taking ATMs; E-banking; Telephone banking services; BIS central bankers’ speeches In-store banking services – banks can provide some banking services within the premises of stores; Mobile top-up services – banks can sell airtime on behalf of mobile phone providers through ATMs; Truck-banking services – the model entails engagement of agents for provision of cash-in/cash-out transactions for clients where banks have no footprint; Bancassurance – banks can sell insurance products on behalf of insurance companies; and Introduction of Visa debit and credit cards. These innovations have resulted in notable developments in the financial sector, such as: (i) Growth in Investments in Loans and Leases: total loans and leases have increased to K10,182 billion as at 31st May 2011 from K1,079 billion as at 31st December 2001. The 843% increment has resulted in the introduction of various credit facilities, for example employer backed salaried loans, trade finance products, vehicle finance leasing, SME loans, invoice discounting, mortgages, etc; (ii) Growth in Bank’s Total Assets: total assets have increased by 614% to K24,693 billion as at 31st May 2011 from K3,460 billion as at 31st December 2001. (iii) Growth in Deposits: total deposits have increased by 661% to K18,297 billion as at 31st May 2011 from K2,405 billion as at 31st December 2001. (iv) Growth in Branch Network: currently there are 237 branches and agencies countrywide. Ten years ago, there were a total of 161 outlets. (v) Continuous Improvement of Risk Management Systems resulting in the creation and update of the range and quality of the products and services; for example hedging products, derivatives, credit risk rating systems, interest rate risk management. (vi) Introduction of the Credit Reference Bureau is expected to provide key information to lenders on borrower’s credit history. (vii) Access to credit has been further enhanced through the Country’s membership in international multilateral financial institutions such as the African Development Bank, the African Export-Import Bank, PTA Bank and the International Finance Corporation (IFC). Access to other institutions like the European Investment Bank is also possible. (viii) Development of the capital markets has also made it possible for corporates to raise long term finance. Stock markets enable firms to acquire much needed capital at relatively lower cost, hence facilitating capital allocation, investment and growth. (ix) Other innovative financial products introduced on the international capital markets include diaspora bonds and carbon credit financial instruments. There is need for Zambian businesses to take advantage and understand these financial products in order to access funding from multilateral institutions. 5.0 Competition in the Zambian financial sector The BoZ recognises that competition is an essential element in the effective and efficient operation of a market economy. In this regard, the licensing regime encourages entry of players that will foster integrity, innovation and competition while deepening and widening the financial sector. BIS central bankers’ speeches The presence of reputable financial intermediaries is expected to increase competition, which in turn would lead to an improvement in the quality of domestic financial services and allocative efficiency, reflected by lower operating costs and narrower margins. The increased efficiency of financial intermediation would eventually be translated into higher returns for domestic savings and greater efficiency in the pricing of credit and other risks and in the allocation of credit. However, despite the growth in number of financial institutions in Zambia, this development has not had a very significant impact on promoting competition, as most of the banks are small in terms of size. A few banks continue to enjoy an oligopolistic position and this in a way explains why some inefficiency remains in the provision of services. The banking sector has remained fragmented, with insufficient and distorted competition, thereby rendering it rigid in its activities. Competition is not strong enough to lead to a convergence of prices, which would ensure that banks have more or less the same prices for their services and products, affordable to most people. This could also partially explain why finance service providers are not revising their interest rates and charges in tandem with the movements in key macroeconomic indicators such as inflation. Whereas the Bank of Zambia is conscious to the fact that the financial institutions are in business and are therefore expected to make profits, there is a need to make financial services more affordable in order to provide an impetus to promote economic growth and reduce poverty levels in the country. Low interest rates reduce the cost of doing business and encourage investments in key sectors of the economy. 6.0 Legislative provisions on interest rates and the cost of borrowing The Banking and Financial Services Act (BFSA) does not have any provision for the regulation of interest rates that financial service providers can charge. This is in line with the principles of liberalisation and a market driven economy. However, in accordance with the Banking and Financial Services (Cost of Borrowing) Regulations of 1995, all credit providers are mandated to disclose their costs of borrowing in full before issuing a loan. Credit providers are required to disclose the annual interest rate charged on a loan. Although, interest rates on loans and charges on services and products may vary significantly from one institution to another, it is incumbent upon all financial services providers to provide clear information and full disclosure on the costs and options available. It is also important for institutions to sensitise customers on what products may best suit their incomes and to educate them to borrow prudently. In this way, transparency is enhanced and consumers would have a clear picture of precisely how much they need to borrow relative to their income levels. This would result in responsible lending and a more competitive and transparent financial industry. However, financial education needs in Zambia are many and varied. They stem from inadequate understanding, by a good proportion of the population, of basic financial terms and concepts on the one hand, and a lack of knowledge of financial products and services that are increasingly available, on the other. To this end the Bank of Zambia through the FSDP in collaboration with stakeholders has developed a national financial education strategy for Zambia. The proposed national strategy for Zambia clearly identifies all the possible financial education delivery channels and responsible institutions in order to avoid duplication and waste of efforts during the implementation stage of the strategy. BIS central bankers’ speeches 7.0 Measures to reduce interest rates Although interest rates have trended downwards in the recent past with commercial banks average lending rate at 26.2% in March 2011 from 54.5% in 2001, the reduction is not in tandem with the fall in inflation and yield rates on government securities. The Government and the Bank of Zambia continue to take measures to provide macroeconomic stability necessary for the reduction of interest rates in Zambia. Some of the measures undertaken so far include the following: (i) Inflation: the other challenge with regard to lowering lending rates is to attain and sustain low (preferably single digit) annual inflation. An upward trend in inflation is undesirable, as it raises inflationary expectations causing banks to increase their lending rates. Prior to 2006 inflation in Zambia was persistently high and above single digit. However, from 2006 inflation has been contained in single digit except from the 2008 when the financial crisis resulted in the increase of inflation to 16.6%. Inflation was recorded at 7.9% in December 2010 from 30.1% in January 2001. This has resulted in a fall in interest rates with banks Average Lending Rate coming down to 26.2% in March 2011 from 54.5% in December 2001. (ii) Domestic financing: to contribute to efforts aimed at lowering lending interest rates, the Government has adopted prudent fiscal policies with domestic borrowing significantly reducing over the recent years. The reduction of borrowing by the Government reduces the crowding out effect and more resources are available to lend to the private sector. This has also contributed to the lowering of yield rates on Government securities which is the opportunity cost for loanable funds. The composite yield rate for Treasury bills was 8.2% at end-December 2010, down from 49.1% recorded at the end of 2001. The fall in yield rates on government securities reflected reduced inflationary expectations and improved fiscal management. (iii) Reduction of Statutory Reserve Ratios: banks argue that statutory reserve ratio is a critical in determining interest rates as a high ratio tend to raise the operating cost for banks by locking up loanable funds in a non-interest earning asset. The opportunity cost of these funds is therefore included in the cost of conducting banking business. On 1st October 2007, Bank of Zambia reduced the statutory reserve ratios on both Kwacha and foreign currency deposits from 14.0% to 8.0%. This followed the earlier reduction in October 2003 from 17.5%. The reduction in statutory reserve ratios entails a release of more liquidity into the financial system which is expected to provide more loanable funds to banks and contribute to lowering interest rates. (iv) Establishment of Credit Reference Bureau: the first and only credit reference bureau (CRB) in Zambia, Credit Reference Bureau Africa Limited (CRBAL) was licensed in 2006 and commenced operations in 2008. The CRB is expected to enhance positive credit behaviour by providing lenders with information on borrowers’ payment histories. The CRB provides an essential service that aids lenders to be able to evaluate and price loans better. Good borrowers with a perceived low risk premium should have access relatively cheaper credit while bad borrowers can be denied credit thus reducing default rates and ultimately the price of credit. (v) Sovereign Credit Rating: Fitch Rating and Standard and Poors both assigned the country with a B+ Sovereign Credit Rating. The rating is expected to provide an opportunity for both the Government and the private sector to access cheaper funds on the international financial markets. BIS central bankers’ speeches 8.0 Conclusion The Bank of Zambia acknowledges that there has been remarkable development in the financial sector over the past years, as evidenced by the various new products and innovations. However, despite the growth in products and services being offered, customers are still faced with high costs of borrowing. The challenge for the financial sector therefore is to improve on their operations by engaging in innovative activities that will reduce their cost of operations and pass on the efficiencies to borrowers. From the foregoing, it is clear that the challenges of reduction of interest rates to levels that would facilitate economic development through an efficient savings mobilisation and credit allocation system are numerous. However, they are not insurmountable. The solutions are in the hands of all stakeholders in the financial sector. The Government and the Bank of Zambia have implemented initiatives aimed at lowering the cost of borrowing, specifically, inflation has been reduced, yield rates on Government securities are low due to reduced rate of Government borrowing and falling inflation rates, statutory reserve ratios have been reduced to low levels and a credit reference bureau is in place to deal with perceived high default risks. International access to funding has also been improved. The Bank of Zambia continues to engage commercial banks to come up with measures that will lower the cost of credit. Whereas blue chip corporate customers are getting favourable rates, usually below lending base rates, other categories of borrowers still face high lending rates. Accordingly commercial banks prudential returns are being revised to show different rates to various categories of borrowers. Support to the productive sectors by the financial system is critical to spur the economy to further growth and development. In this regard, banks are challenged to continue playing their part by reducing lending rates to affordable levels. BIS central bankers’ speeches | bank of zambia | 2,011 | 8 |
Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the official launch of CETZAM's "Tusunge" Savings Product, Lusaka, 8 July 2011. | Caleb M Fundanga: Improving the savings culture of Zambians Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the official launch of CETZAM’s “Tusunge” Savings Product, Lusaka, 8 July 2011. * * * The Board Chairperson of CETZAM Financial Services Limited, Mr Frederick Nduna; Members of the Board of CETZAM Financial Services Limited; The Chief Executive Officer of CETZAM Financial Services, Mr Dyson Mandivenga; Chief Executive Officers and Representatives of various organisations present; Distinguished Invited Guests; Members of the Press; Ladies and Gentlemen. Let me begin by thanking the Board of Directors and Management of CETZAM Financial Services Limited (CETZAM) for inviting me to this occasion, which marks the official launch of the “Tusunge” Savings Product. May I commend the Management of CETZAM for their foresight in developing this new savings product, which will go a long way towards inculcating a savings culture and enhancing financial inclusion within our financial sector. As a financial sector regulator, the Bank of Zambia is pleased to be associated with the achievements of the institutions we regulate, particularly where these developments lead to increased access to financial services for the Zambian public. This is what CETZAM is doing this morning. CETZAM’s focus to introduce innovative products is adequate testimony of its commitment to serve the financial needs of the Zambian people. I am informed that one of the key objectives of CETZAM Financial Services Limited is to provide sustainable microfinance services to the economically disadvantaged citizens of Zambia. In so doing it targets the entrepreneurial poor, the majority of whom are women. I also know that CETZAM was licensed by the Bank of Zambia as a deposit-taking MFI on the 3rd of October 2008. Today, CETZAM has 5 branches in Lusaka, Livingstone, Ndola, Kitwe and Chingola while 9 satellite offices have been set up in the provinces to serve its rural clients. Mr. Chairman, The Bank of Zambia is particularly encouraged by CETZAM’s role as an active lender to the Small and Medium Enterprise (SME) sector, which is a growth sector in Zambia’s economy. It is also gratifying to note that the company currently has about 8,000 active clients with a repayment rate of over 90%. Distinguished invited guests, an important element for financial service providers is to endeavour to keep their customers satisfied by offering superior but affordable products and delivering excellent service. The ability to offer diverse products appealing to a wider range of clients leads to enhanced access to financial services. The Bank of Zambia is determined to facilitate the introduction of new and innovative financial products, to tap savings and facilitate the interface between savings and investment. The Bank of Zambia will, therefore, continue to work in close collaboration with the financial sector to cultivate partnerships in order to establish the framework necessary for building strong institutions that will mitigate risks and build confidence in the sector. Mr. Chairman, as you are aware, Zambia’s economy has continued to grow underpinned by growth in various sectors including Agriculture which has recorded significant increase in output of maize in 2009 and 2010. It is also worth noting that a large portion of the Zambian population depends on agriculture for its livelihood, yet lending to agriculture has been limited. The challenge, therefore, is to devise financial products that meet the requirements BIS central bankers’ speeches of the rural and pre-dominantly agricultural areas while at the same time devising means of “ring fencing” the financial institutions from risks associated with agricultural lending. However, I am pleased that the improved performance in the agricultural as well as other sectors of the economy is expected to continue, which will invariably translate into higher incomes in Zambia. Potentially, the scope for savings both in the formal and informal sectors is expected to improve; hence, products such as the one CETZAM is launching today are likely to capture this potential. Furthermore, I am reliably informed that the “Tusunge” Savings Product offers a cheaper option of funding for CETZAM which undoubtedly should trigger a reduction in the cost of credit. The product has a minimum deposit balance of K20,000, unlimited withdrawals, no withdrawal charges and an interest rate of 6 percent per annum. The product is specifically targeted at the informal sector and SMEs. People in the informal sector and SMEs who hitherto were unable to open savings accounts with banks due to high minimum deposits and service charges should find the “Tusunge” Savings Product attractive. Ladies and Gentlemen, in the face of an ever growing fear of donor fatigue, public deposits and private capital are likely to be the main source of funding for the microfinance industry to achieve the growth required for it to have significant impact on financial inclusion and poverty reduction across the region. Notwithstanding this, allow me now to reflect on some of the key challenges in the financial sector that all of us must strive to address: (i) Increasing access to financial services by the SME’s who form the backbone of the economy. This sector provides employment for many people who cannot be absorbed into formal employment. However, increased access to financial services remains a key challenge to this segment. (ii) Although the Bank of Zambia has licensed 25 Microfinance Institutions, most of them operate along the line of rail providing mainly salary-backed loans. There is need for microfinance institutions to support production by providing finance to agriculture and manufacturing instead of merely providing consumption related salary backed loans. (iii) There is need for all microfinance institutions to utilise the credit reference bureau at all times. A robust credit reporting apparatus will enable the financial sector to share critical customer information that will lead to lowering the credit risk and ultimately lending rates in the financial sector. In conclusion, allow me to reiterate the Bank of Zambia’s concerns with regard to high lending rates being charged by financial institutions, especially Microfinance Institutions, which are inhibiting the expansion of credit. I acknowledge that some financial institutions have begun to lower their interest rates but I am certain that there is room to do more. The continued lowering of lending rates by Microfinance Institutions will not only stimulate our economy but also reduce non-performing loans in the industry as low lending rates reduce the risk of default. I am informed that CETZAM’s interest rates range from 48% to 72% per annum. I have also been informed that CETZAM introduced an agricultural loan product for rural areas and last year lowered the interest rate from 60% to 48% per annum. It is my sincere hope that CETZAM will further reduce lending interest rates to these clients that they are targeting for savings deposits. The Bank of Zambia undertakes to continue pursuing policies that will drive financial innovation, build strong financial institutions and partnerships to ensure a stable financial sector in the country. It goes without saying that strong financial institutions can weather shocks more easily and thus contribute to Zambia’s economic growth. BIS central bankers’ speeches Finally, Ladies and Gentlemen, I wish to take this opportunity to once again congratulate and commend the Management of CETZAM for introducing this new savings product, which is expected to improve the savings culture of the ordinary Zambians in the community. I am hopeful it will be a successful product. With these remarks, it is now my singular honour and privilege to declare CETZAM’s “Tusunge” Savings Product officially launched. I thank you for your attention. BIS central bankers’ speeches | bank of zambia | 2,011 | 8 |
Talking notes by Dr Caleb M Fundanga, Governor of the Bank of Zambia, with the business community in Kitwe, Kitwe, 25 July 2011. | Caleb M Fundanga: Recent economic developments in Zambia Talking notes by Dr Caleb M Fundanga, Governor of the Bank of Zambia, with the business community in Kitwe, Kitwe, 25 July 2011. * * * RECENT ECONOMIC DEVELOPMENTS Introduction The Zambian economy has recorded significant positive developments following the implementation of various reforms. This is reflected in positive real GDP since the early 2000s, low and falling inflation, a downward trend in lending interest rates, favourable external sector performance as well as relative stability in the exchange rate of the Kwacha. These developments can be attributed to improved monetary and fiscal policy management and improved economic management, which in turn has enhanced investor confidence. Real gross domestic product (GDP) Zambia’s national output, as measured by Gross Domestic Product (GDP), has grown by an average of 6.4 percent annually in the last five years. The Zambian economy grew by 7.6 percent in 2010, compared to 6.4 percent in 2009, and exceeded the target of 5 percent. The key contributors to the sustained increase in economic activity have been increased production in the mining, agricultural and construction sectors. The agricultural sector recorded a historical bumper maize harvest of over 2.8 million metric tonnes during the 2009/10 season and another 3.0 metric tonnes during the 2010/11 harvest season. This was supported by favourable weather conditions and the Farmer Input Support programme. Performance of the mining sector increased following higher output arising from increased capacity utilisation at various mines and investments into operations at various mines. Metal mining was the main driver of this growth, with copper and cobalt output growing by 17.4% and 49.4% to 819,159.19 mt and 8,781 mt, respectively. Construction output was driven by increased public and commercial infrastructure projects around the country, as well as continued high demand for housing. This was supported by expansion in domestic production of cement. Inflation Consistent with the favourable performance in economic growth, the country has succeeded in lowering inflation. Inflation has declined from 17.2 percent in 2003, 9.9 percent in 2009 and stood at 7.9 percent at end-2010. Inflation continued to be moderate, and stood at 9.0 percent as at June 2011. The decrease in inflation over the years can be attributed to prudent monetary policy and a relatively stable exchange rate. The increase in food supply, arising from the favourable crop harvest, has also been a key factor in moderating inflationary pressures in light of high and increasing prices of petroleum products due to high international oil prices. BIS central bankers’ speeches Interest rates Interest rates have generally been on a declining trend in line with the fall in inflation and yield rates on Government securities. This trend was broken as a result of the financial crisis in 2008. Commercial banks’ average lending rates decreased to 27.9 percent in 2010 from 28.4 percent in 2009. In June 2011, average lending rates stood at 26.0 percent. In the Government securities market, the weighted average Treasury bill yield rate was 7.7 percent in 2010, from 9.5 percent in 2009. Similarly, Government bonds composite yield rate fell to 12.3% from 15.9 percent in 2009. As at June 2011, the weighted average Treasury bill rate was 10.0 percent, while the composite bond yield rate was 15.7 percent. External sector performance The external sector recorded favourable performance, as evidenced by an increase in the balance of payments surplus and a rise in the country’s gross international reserves. The country’s gross international reserves rose to US$2,093.7 million from US$1,924.2 million in 2009. This followed increased receipt of donor funds as well as recovery in the global economy that saw increased demand and international prices for most commodities, including copper. The Balance of Payments (BoP) recorded a surplus of US$138.1 million in 2010. The surplus was attributed to the positive outturn of the current account to US$982 million in 2010 from a deficit of US$378 million in 2009. This was mainly on account of an improvement in Zambia’s trade balance, which increased by 312.8 percent to US$2,076.5 million from a surplus of US$503 million in 2009. Total merchandise export earnings rose by 71.2 percent to US$7,261.7 million in 2010 from US$4,242.8 million recorded in 2009, following increases in both metal and non-traditional export earnings. Metal export earnings rose by 81.6 percent to US$6,071.7 million in 2010 from US$3,343.1 million in 2009, of which copper export earnings were US $5,767.9 million and cobalt export earnings were US $303.8 million. This was explained by the rise in copper and cobalt production following increased capacity utilisation at various mines and higher global market prices. Exports of non-traditional products registered a growth of 34.3 percent to US$1,279.3 million in 2010 from US$952.5 million the previous year. This was driven by higher exports of copper wire, cane sugar, burley tobacco, cotton lint, electrical cables, gemstones, maize and maize seed, and wheat and meslin. Total merchandise imports grew by 40.3 to US$4,788.8 million in 2010 from US $3,413.4 million in 2009. Exchange rate Following strong macroeconomic fundamentals and increased supply in foreign exchange, the Kwacha performed favourably against all the major traded currencies in 2010, except for the South African Rand. The Kwacha appreciated by 4.7 percent against US dollar to trade at K4,798.36/US$ from K5,033.95/US$ in 2009. Similarly, the Kwacha appreciated by 6.0 percent against the British Pound and by 8.0 percent against the Euro to trade at K7,392.04/£ and K6,362.14/€, respectively. BIS central bankers’ speeches However, the Kwacha registered a depreciation of 8.8 percent against the South African Rand. Fiscal sector developments Fiscal prudence has improved over the past years, with domestic revenues performing well following higher collections of value added taxes, as well as income taxes from mining companies. This in effect has also been seen in increased government expenditure on growthsupporting activities such as infrastructure and social sector spending. Over the last few years, Government has also reduced its borrowing from the banking sector, thereby avoiding the crowding out of the private sector and contributing to downward movements in interest rates. Financial sector developments The overall financial condition and performance of the financial sector in 2010 was satisfactory, as reflected in adequate capitalisation and most financial institutions meeting their minimum regulatory requirements. The banking sector was adequately capitalized and asset quality, liquidity and earnings performance remained satisfactory. The Bank granted a licence to International Commercial Bank (Z) Limited, bringing the number of commercial banks operating in the country to 18. Similarly, the overall financial performance and condition of the Non-Bank Financial Institutions (NBFIs) in 2010 was fair. On average, the leasing finance institutions and bureaux de change sub-sectors reported adequate capital, fair asset quality, liquidity position and earnings performance. Prospects for 2011 Several indicators point to continued strong economic performance in 2011. Real GDP is projected to grow by at least 6.8 percent and will continue to be driven by strong performance in the agricultural, mining, construction and tourism sectors. This will be aided by anticipated strong performance in the external sector, already reflected by favourable performance in the first half of the year. Inflation is expected to slow down to 7.0 percent by end of 2011. The bumper harvest recorded during the 2010/11 harvest season is expected to dampen effects on overall inflation through the food component. In the mining sector, copper production is expected to increase due to continued investments in the mining sector. In addition, the major infrastructure projects currently taking place are expected to support growth in the construction sector. As the global economy continues to recover from effects of the global economic crisis, growth in tourism is also expected in 2011. The positive developments recorded in the Zambian economy thus far will go a long way is shaping tomorrow’s future. This should trickle down to all sectors of the economy and raise employment and income opportunities for Zambians, and therefore be lifted the majority of people out of poverty. BIS central bankers’ speeches IMPLICATIONS OF RECLASSIFICATION OF ZAMBIA TO MIDDLE INCOME STATUS Effective July 1, 2011, Zambia has been reclassified by the World Bank as a lower middle income nation. Lower middle-income countries are those with per capita gross national incomes (GNIs) of between US $1,006 and US $3,975 per year; while upper middle-income countries are those with GNIs between US $3,976 and US $12,275. This status reflects the continued economic growth that has been registered in the recent years. Zambia’s reclassification as a middle income country would enhance investor confidence and further boost the investment climate thereby creating jobs and wealth for the people. In terms of financing, it should be noted that with the new arrangement, the government would be able to access more non concessional financing which remain key for infrastructure development necessary for economic development. This is in contrast with the previous status whereby Zambia could only access limited concessional financing which attracted very low interest rates and payable after a long time. Despite the positive reclassification, it should be noted that the disparity between the poor and the rich would always be there and do exist even in developed countries. The challenge for the Government is to implement policies that will redistribute wealth so that inequality is reduced. Nevertheless, with reclassification, it shows that the Government has been working very hard to accelerate economic growth, which is a necessary for economic development. On average, people have been pulled out from poverty as per capita income has risen from US $300 in 2000 to over US $1000 in 2010. Countries in Africa that are in this class, lower middle income, include the following Angola, Cameroon, Cape Verde, Republic of Congo, Côte d’Ivoire, Djibouti, Arab Republic of Egypt, The Gambia, Ghana, Lesotho, Mauritania, Morocco, Nigeria and São Tomé and Principe. IMPLICATIONS OF SOVEREIGN CREDIT RATING The rating that has been assigned to Zambia reflects strong economic performance as shown by the GDP growth rate. This has also been supported by low rate of inflation and fiscal deficits, external sector performance supported by the mining sector, and activities in key economic sectors, including agriculture and tourism, as well as strong external balance position after huge debt relief from international creditors obtained in 2005. The rating puts the Zambian business community and government in a strong position to access finance globally at risk adjusted interest rates for investment that is essential for sustained economic growth and improved living conditions of the citizens. Furthermore, the rating entails transparency in the economic management of the country’s resources and provides an opportunity for the country to work on the weaknesses identified by the rating agencies. For instance, from the rating report it was noted that Zambia still faces challenges in the energy sector and infrastructure development. It therefore, follows that once the country addresses the identified weaknesses, the rating could improve. In summary, the rating assigned to Zambia shows stability and predictability of government policies and signals improvements in the business environment. This is also comparable to our peers in Africa. With increased globalisation of the world BIS central bankers’ speeches economy, there is no doubt that Zambia stands to benefit from the rating assigned on condition that the country adopts appropriate policies that are supportive to sustainable economic growth environment. RECENT DEVELOPMENTS IN MINING AND MANUFACTURING (MFEZ) A. Mining Growth in the Zambian mining and quarrying sector has continued to be strong since privatisation. In 2010, the growth in the sector was 15.2% (20.2% in 2009), thus contributing strongly to the 7.6% real GDP growth in 2010. Growth in metal mining was 16.0% with copper and cobalt output increasing by 17.4% and 49.4% to 819,159.19 mt and 8,781 mt, respectively. During the first half of 2011, total copper output at 414,984.5 mt, was 4.0% higher than 399,062.0 mt produced during the corresponding period of 2010. Similarly, cobalt output was 4,352.7 mt, 8.5% higher than 4,012.8 mt produced in the first half of 2010. This outturn was largely explained by the increase in the scale of production by the mines coupled with the rebound in copper prices, following the relative recovery in the global economy. B. Manufacturing Performance of the manufacturing sector in 2010 and the first half of 2011 have been favourable with a 4.1% growth in 2010 (2.2% in 2009). Growth has largely been driven by agro-processing (food & beverages), including production of nonmetallic mineral and fabricated metal goods, chemicals, explosives and construction materials (such as cement). Growth in Agro-processing has been supported in part by the last two maize bumper harvests, 2010 (2.8 million mt of maize) and (3.0 million mt of maize 2011). Strong construction activities have stimulated strong demand for manufacture of construction materials particularly cement and cement-related products. Total cement output by the country’s three manufacturing plants (Lafarge Zambia Plc, Oriental Quarries and Zambezi Portland Plc) rose by 37.9% to 1,126,728 mt in 2010 from 817,223.0 mt in 2009. Further, during the first half of 2011 cement output at 617,115.2 mt was 36.0% higher than the 453,791.0 mt produced in the corresponding half of 2010. C. Multi-facility economic zones Zambia’s goal catalyzing industrial and economic development through increased activity in the manufacturing sector has led the country to embark on the development of Multi-Facility Economic Zones (MFEZs) in selected parts of the country. Among the MFEZs are: – The Chambishi MFEZ (construction is advanced) being developed in partnership with the Chinese government with a commitment of over US $1 billion; – Two Lusaka MFEZs (preparatory phases) and one industrial park. One of the Lusaka MFEZs, the Lusaka South, will be developed in cooperation with a Malaysian firm at an estimated cost of US $1 billion; BIS central bankers’ speeches – Solwezi (Lumwana) (preparatory phase). The MFEZs are expected to significantly contribute to employment creation in the country. HOW LOCAL BUSINESSES CAN POSITION THEMSELVES TO TAKE ADVANTAGE OF THE OPPORTUNITIES ARISING FROM THE ABOVE Local businesses should take advantage of the improved confidence in the Zambian economy to access cheaper credit from the international capital markets; Higher domestic incomes imply higher domestic demand; thus local producers can take advantage economies of scale from increased production for the domestic market; Local businesses should also take advantage of the opening up of new mines and the establishment of MFEZ in adding local content to the products. This will entail making local products and services more competitive. BIS central bankers’ speeches | bank of zambia | 2,011 | 8 |
Speech by Dr Austin Mwape, Deputy Governor-Operations of the Bank of Zambia, at the Official Launch of "Airtel Money", Lusaka, 14 September 2011. | Austin Mwape: Improving financial transactions in Zambia Speech by Dr Austin Mwape, Deputy Governor-Operations of the Bank of Zambia, at the Official Launch of “Airtel Money”, Lusaka, 14 September 2011. * * * The Managing Director of Airtel – Mr Fayaz King The Former First Lady, Mrs. Maureen Mwanawasa Management and Staff of Airtel Chief Executive Officers and Representatives of various institutions present Distinguished invited guests Members of the press Ladies and Gentlemen Let me begin by thanking the management of Airtel for inviting me to this occasion, which marks the official launch of “Airtel Money” and may I also thank the Managing Director of Airtel, Mr. Fayaz King, for inviting me to speak at this important occasion. As has already been stated, Airtel Money will provide an electronic wallet that will enable customers to make different types of commercial transactions conveniently, quickly and safely. Customers will be able to make person to person payments, make purchases and pay various utility bills using this product. Airtel Money will certainly contribute to improving the way in which we transact and will also provide an efficient tool that will give Airtel customers the ability to carry out financial transactions from the comfort of their own homes. As you may be aware, the Bank of Zambia in consultation with key stakeholders has put in place an enabling environment to promote the development of modern payment systems in Zambia. For example the National Payment Systems Act which was enacted in 2007 gives powers for the Bank of Zambia to regulate and oversee operations of payment systems to ensure the effectiveness, efficiency and safety of payment systems so as to promote the stability and safety of the Zambian financial system. Further, the Bank of Zambia through the National Payment Systems Vision and Strategy 2007–2011 and the Financial Sector Development Plan, has undertaken various activities that are focused on improving access to financial services for both the banked and unbanked population. You may recall the Topline findings by Finscope on our financial sector development systems and their recommendation to expand access to financial services to the unbanked population in remote areas. The launch of Airtel Money is expected to contribute positively to the financial inclusion agenda which in turn will have a positive impact on the economy at large. In addition, the Bank is in the process of putting in place Electronic Money Regulations that will ensure that e-money transactions are operated within safe, efficient and secure bounds. Distinguished guests, allow me to also comment on the recent B+ sovereign rating assigned to the country by world renowned rating agencies Standards and Poor and Fitch, as well as, the reclassification of Zambia as a middle income country by the World Bank. The rating and reclassification requires the central bank, the Zambian business community and Government to continue enhancing the financial system to ensure that it is robust and reaches the unbanked. Ladies and Gentlemen, the product that is being launched today, demonstrates the way businesses are evolving to bring forth financial solutions that benefit customers. This service provides an important avenue for harnessing resources for financing development in our BIS central bankers’ speeches communities as Airtel will partner with various stakeholders in different sectors of the economy. This will further enhance the development of the telecoms sector and its contribution to our economy. Therefore, I wish to commend Airtel for introducing this product which is expected to contribute towards bridging the gap in financial service provision by catering for customers in remote areas who have no access to banking services. The product is expected to extend the financial inclusion agenda in that it will be far reaching thereby impacting positively on the Zambian public. I am also informed that the product is expected to reduce the use of cash in the economy. As you may be aware, the Bank of Zambia has been working towards reducing the use of cash in the economy by encouraging the use of alternative electronic means of payment such as the product being launched today. It is initiatives and innovations like Airtel Money that will make it possible for the general public to have alternative methods of transacting other than cash and other transnational payment instruments. To this end, I wish to mention that the Bank of Zambia with other stakeholders is in the process of putting in place a National Switch that will further enhance initiatives such as this one whose launch we are witnessing today. Ladies and Gentlemen, the Bank of Zambia will continue to support any efforts and innovations by the private sector that extend the provision of financial services to the majority of our citizens. I look forward to seeing the product being launched today live up to the expectations of providing a safe, efficient, secure and reliable service to the Zambian people. I hope that all customers will enjoy using the Airtel Money service. With these few remarks, I wish to declare Airtel Money officially launched and wish it all the success. Thank you. BIS central bankers’ speeches | bank of zambia | 2,011 | 9 |
Opening remarks by Dr Bwalya K E Ng'andu, Deputy Governor (Operations) of the Bank of Zambia, to the Financial Sector Development Programme (FSDP) presentation of corporate governance model board charter to financial sector stakeholders, Lusaka, 25 October 2011. | Bwalya K E Ng’andu: Enhancing corporate governance among various stakeholders within the financial sector Opening remarks by Dr Bwalya K E Ng’andu, Deputy Governor (Operations) of the Bank of Zambia, to the Financial Sector Development Programme (FSDP) presentation of corporate governance model board charter to financial sector stakeholders, Lusaka, 25 October 2011. * * * Chief executive officers and senior management of financial institutions Members of the FSDP Secretariat and Working groups Distinguished participants Ladies and Gentlemen Let me start by thanking the organisers of this meeting for inviting me to make opening remarks at the presentation of the corporate governance model board charter. As you are aware, corporate governance has been identified as one of the most important components of the Financial Sector Development Programme (FSDP). The reason for this is not difficult to discern. The relationship between financial institutions and the public is premised on trust. Loss of confidence and trust in even one financial institution can threaten the stability of the entire financial sector because feelings about one erring institution can be extended to other institutions. This fiduciary responsibility that financial institutions carry requires that all players in the financial sector are subjected to elaborate oversight. In this regard, the Boards of Directors are one organ that is vested with this responsibility of oversight. Before I comment on the significance of board charters in augmenting good corporate governance in the financial sector, I think it is appropriate that I acknowledge the commendable work that has gone into implementing the FSDP through collaborative effort involving government and other institutions. The Government, working with the three financial sector regulatory bodies, namely, the Bank of Zambia, the Pensions & Insurance Authority and the Securities & Exchange Commission has continued to take the lead in implementing various reforms. This effort has been supported by private sector experts and representatives responsible for the technical aspects of implementing the FSDP recommendations. This collaborative effort among a range of market players has resulted in positive milestones being achieved including: (i) Ongoing review and updating of the financial sector legislation, including the Banking and Financial Services Act; the Pensions Scheme Regulation Act; the Insurance Act; and the Securities Act targeted for legislation in 2012; (ii) Participation in the on-going review of the Companies Act whose comprehensive revisions under the Ministry of Commerce, Trade and Industry are scheduled for 2012; (iii) Resolution of weaknesses in the state owned financial institutions which have become profitable and innovative in terms of delivery of financial services; (iv) Introduction of a regulatory framework for the introduction of a credit reference bureau; (v) Development and issuance of anti money laundering guidelines and the establishment of a Financial Intelligence Unit; BIS central bankers’ speeches (vi) Development and issuance of the corporate governance guidelines by the regulators; and, (vii) Strengthening the autonomy and enhancing the supervisory capacities of the three financial sector regulatory authorities. Through the FSDP, the BoZ is also working with stakeholders like the Institute of Directors (IoD) in enhancing corporate governance among various stakeholders within the financial sector. Under the first phase of the FSDP, IoD conducted seminars on core principles of corporate governance targeted at executives and senior officials in the financial and business sector. In addition, the IoD provided input into the Corporate Governance Model Board Charter which has been developed with technical expertise from MTN Special Engagements led by Ms Mary Ncube. The outcome of this work is what will be presented to you today. The presentation will focus on the significant position that Boards of Directors occupy in the whole Corporate Governance process and how their role, functions and operations may be reduced into a charter that might guide their work., including; Powers, functions and delegations of the board; Board composition and mix – and the challenge in state-owned institutions; The Chairperson and CEO – and whether they should be different persons and why; Rights and duties of Directors – and that ultimately the buck stops here; The role of the Board Secretary – and how they can help drive the right agenda; Disclosure of conflict of interest and the challenge of ethical standards; Members’ remuneration and expenses – and what is morally right? Corporate social responsibility; and, Evaluation of the Board’s performance, etc. But why do we need a Board Charter one may be tempted to ask? I think it is correct to say that second only to the articles of association, a Board Charter is probably the most important corporate governance policy document which defines the respective roles, responsibilities and authorities of the board and management in setting the direction, the management and control of an organisation. It is a document that is useful to both old and new directors, particularly those who may not be familiar with how a company conducts its business and what is expected of them as directors. In this respect, the charter serves the following functions among many; One-source reference – a board charter is a one-source document which clearly sets out how the board and directors are to perform their roles. As an induction tool – a board charter acts as an induction tool for new directors and senior managers. Standard key board documentation – it contains documentation templates for such things as the board meeting agenda and board paper format. Having said this, I need to place a rider by stating that these charters that you will be examining this morning only set out minimum standards of what the boards are required to do. Some institutions present here may already have charters which are more elaborate than the model charters. That is fine as you will not be required to downgrade your existing charters. But for those institutions which might not have any charters, it may well be useful to consider customising the model charters. If in adopting model charters, some of you find certain provisions too onerous, it may be necessary to consider a phased approach to their adoption. In this way, the process of adopting model charters will not place on an BIS central bankers’ speeches organisation undue difficulties. The model charters, it is hoped will act as guide for institutions to adopt elements that are applicable to their sub sector and industry and act as a benchmark, for you, and for assessing board and management and for assisting the oversight function by regulatory supervisors., such as ourselves. I expect that individual institutions requiring further advice will continue to engage us, as well as the consultants, to ensure that they extract maximum benefit from the work that has gone into this phase of the FSDP. I thank you all and wish you fruitful deliberations. BIS central bankers’ speeches | bank of zambia | 2,011 | 11 |
Speech by Dr Bwalya K E Ng'andu, Deputy Governor (Operations) of the Bank of Zambia, at the 3rd Celpay Mobile Banking Conference, hosted by Celpay Zambia Limited, Lusaka, 26 October 2011. | Bwalya K E Ng’andu: Accelerating growth and adoption in mobile payments Speech by Dr Bwalya K E Ng’andu, Deputy Governor (Operations) of the Bank of Zambia, at the 3rd Celpay Mobile Banking Conference, hosted by Celpay Zambia Limited, Lusaka, 26 October 2011. * * * The Chief Executive Officer, Celpay International BV; Managing Director, Celpay Zambia Ltd, Mr. Miyanda Mulambo; The Conference Chairperson, Mr. Maxwell Banda; Chief Executive Officers of Commercial Banks and Financial Institutions; Representatives of International Organizations; Representatives of Zambian business associations; Distinguished participants; Members of the Press; Ladies and Gentlemen. Chairperson, it is my honour and privilege to speak at this, the 3rd Mobile Banking Conference being hosted by Celpay Zambia Limited under the theme “Accelerating Growth and Adoption in Mobile Payments”. The theme of this conference is particularly appropriate as it fits in very well with one major policy objective of the Financial Sector Development Plan; which is to increase access to financial services for the majority of the Zambian people. This conference, I believe, will provide a unique opportunity for participants to share ideas and experiences on innovations and trends taking place in the use of the mobile telephone technology as a convenient, safe and cost effective payment system. It should also offer the platform from which to address the challenges that such innovations can present in order to minimize potential disruption to the operations of the financial system that can arise from our failure to appreciate the possible impact of these challenges. I therefore wish to thank, from the outset, Celpay for organising this timely conference and to welcome most warmly our foreign participants who I’m sure will bring a rare insight to this conference with their own experiences. It is widely acknowledged that expanding access to financial services for Zambia’s unbanked population remains one of the biggest challenges confronting the financial sector in this country. Findings from the last FinScope Zambia Survey which was conducted in 2009 showed that 62.7% of Zambian adults still remained financially excluded compared to 66.3% reported in 2005. This slight increase in access to financial services, however, fails to match the significant increase in the number of banking and non-banking institutions which over the same period increased from 14 to the current 19 banks and to over 90 in the case of the nonbank sector. The mismatch in growth between the supply side and the demand tells us a story that the physical increase in the number of the traditional financial service providers does not necessarily translate into a corresponding increase in access to financial services among the population. I believe it is this mismatch that calls for the need to examine the role that the non traditional platforms, such the mobile phones, can play in enhancing greater access to financial services. Chairman, the 2009 Finscope Survey highlighted a number of barriers to financial inclusion, which were broadly categorized into The physical access or proximity to financial institutions Affordability of financial products BIS central bankers’ speeches Appropriateness of financial products Regulation barriers such as know your customer requirements Chairman, we know, for instance, that the apparent high cost of providing banking services to a population that is largely subsistence and therefore financially challenged excludes many from accessing financial services. Brick and mortar establishments are expensive to set up and even when they are set up, distance to the nearest branch for many, particularly for those in the rural areas becomes a problem. The findings relating to the cost of providing financial services contained again of the Finscope™ Zambia Survey (2005) goes some way in underscoring the nature of the problem. The survey found that about 32% of the banked reported that it costs them between K5,000–K10,000 to get to their bank while about 26% spend between K11,000–K25,000. At these cost levels it is not difficult to see why certain segments of our population do not actively seek financial services. The mobile payment system does therefore address some of these challenges and consequently can be an important platform for expanding the delivery of financial services. In some respects it complements conventional financial services or products. In other respects it makes up for the weakness of the conventional financial service providers. With mobile payments, the cost of travel to a financial service provider is reduced to pressing a button, the risks associated with carrying cash are managed by simply securing a pin number. Since the mobile telephone industry has seen tremendous growth in its coverage, mobile payments seems to be the inevitable retail payment method that reaches out to large segments of the population a way that the conventional ones do not. Chairperson, notwithstanding these advantages, mobile payment platforms are not without challenges. At the centre of these challenges is the need to protect the consumer or user of mobile payment platforms. Undoubtedly, the number of people with access to mobile payment services in Zambia has significantly increased since the early days of Celpay. However, for us at the Bank of Zambia, as regulators we have taken note of how growth has been accompanied by a change in the character of mobile payments. The line between a mobile payment product and a conventional banking product has now become a fine line. For this reason developing appropriate regulations that protect the consumer against fraud and such risks anti-competitive practices, is a critical and necessary response to the innovations brought about by the mobile telephone technology. But it is important to understand that by its nature technological innovation can achieve an overnight quantum leap by the sheer ingenuity of one person. Where this happens, there is a danger that the development of appropriate regulation can lag behind technological advancement. But regulators cannot halt the advancement of technology just so that they are ready to regulate. In this situation, our challenge is to ensure that we keep pace with technology so that we are able to offer the required protection to all who access financial services using the new and unconventional payments systems. On our part, the Bank of Zambia shall focus its attention on the development of a robust regulatory framework that will address the key “hot button” issues of; 1. Prudential requirements; particularly those that relate to liquidity management and capital for infrastructure, 2. Consumer protection; with emphasis on disclosure of charges and confidentiality of customer information, and 3. Unfair trading practices particularly those related to monopolistic tendencies such as development of platform that are not compatible or not interoperable with platforms of other service providers. To strike a balance between a robust regulatory framework and the need for the framework not to hinder innovation and allow business to flourish, our efforts in establishing a robust BIS central bankers’ speeches framework will therefore be anchored on five key or internationally accepted best practice principles. These are: 1. The need to identify the types of mobile payment platforms to be permitted; 2. The need for an efficient mobile payments infrastructure such as settlements systems; 3. The need to design rules to regulate the information communication technology platform which is itself rapidly evolving; 4. Consumer protection; and finally 5. The need for compliance monitoring. Another issue that should be considered in connection with the development of the mobile payment system is that of inter-operability. The ability of systems to work together makes further innovation possible, provides convenience for customers, allows for sharing of infrastructure and therefore greater use of facilities. We are therefore looking to you to ensure that your retail payment systems allow cross network acceptance of payments. Ultimately, we should work towards developing a single switching platform through which all payment systems are connected to each other for maximum efficiency. Chairperson, as you deliberate at this conference, I expect that you will challenge yourselves to the issues that I have outlined above. Accelerated growth and adoption of mobile payments are possible but we must in the process adequately address issues of cost of mobile payments, security of payments, ease of use of technological platforms and design of compatible and interoperable platforms. The Bank of Zambia looks forward to receiving the recommendations and outcomes of this conference. I thank you and wish you fruitful deliberations. BIS central bankers’ speeches | bank of zambia | 2,011 | 11 |
Remarks by Dr Bwalya K E Ng'andu, Deputy Governor (Operations) of the Bank of Zambia, at the Signing Ceremony for a credit line of US$ 5 million between NORFUND and BancABC Zambia, Lusaka, 1 December 2011. | Bwalya K E Ng’andu: Improving access to finance by the SMEs in Zambia Remarks by Dr Bwalya K E Ng’andu, Deputy Governor (Operations) of the Bank of Zambia, at the Signing Ceremony for a credit line of US$ 5 million between NORFUND and BancABC Zambia, Lusaka, 1 December 2011. * * * YOUR EXECELLENCY, THE NORWEGIAN AMBASSADOR, MR ARVE OFSTAD; MEMBERS OF THE DIPLOMATIC CORPS PRESENT; THE CHAIRMAN OF BANCABC ZAMBIA LIMITED, MR. CHANDA CHILESHE; THE MANAGING DIRECTOR OF BANCABC, MR. DANA BOTHA; HEAD OF THE NORFUND SOUTHERN AFRICAN OFFICE, Mr. DEEPAK MALIK; DISTINGUSIHED INVITED GUESTS; MEMBERS OF THE PRESS; LADIES AND GENTLEMEN. Let me begin by thanking BancABC for inviting me to be the guest of honour at this very important event, where we will witness the signing of a credit line worth US $5 million between BancABC and the Norwegian Investment Fund for Developing Countries (NORFUND). It is pleasing to know that the credit line to be signed this morning is specifically tailored to provide financial support to Small and Medium scale enterprises (SMEs). The development of the SME sector and its potential to contribute to aggregate productivity growth, economic growth and development have been stifled by the generally limited access to finance. The credit line to be signed today is an important milestone in improving access to finance by the SMEs in the country. Equally as important as access to finance is the price of financing that is placed at the disposal of SMEs. The general trend in the market has been to charge SMEs with high interest rates relative to the large scale corporate sector because of the perceived high risk they are supposed to present. Distinguished Invited Guests, my view is that this presumed high risk profile associated with SMEs can be effectively managed by banks if they make the necessary effort to understand the sector and build expertise in dealing with its unique characteristics. I trust that you will double up your effort in building the expertise necessary for your bank to be a major lender to the SME sector. The issue of interest rates is of particular concern to us at the central bank. In response to the current situation, the Bank of Zambia recently took measures aimed at facilitating the reduction in commercial banks’ lending rates with the view to increasing access to credit by private individuals and business entities. Some progress has been made in this area and we are monitoring the situation in the market to ensure that borrowers are enjoying a reduction in their effective lending rates. We do not want the reduction in the base lending rates to be cosmetic, but should be reflected in lower effective lending rates for measures taken so far to be meaningful. Furthermore, with the reduction in the corporate tax rate for banks recently announced by the Minister of Finance in his 2012 Budget, the expectation is for a further reduction in lending rates by commercial banks going forward. Ladies and Gentlemen, This initiative is positive and both BancABC and NORFUND should be highly commended for it. As a financing institution, I am aware that NORFUND financing rates are favourable. I want to encourage BancABC to pass the benefit of getting money at BIS central bankers’ speeches favourable NORFUND rates to the final borrowers so that the SME sector will experience the full benefit of this relationship. I wish to end by wishing BancABC the best and success in growing a successful SME lending portfolio. I THANK YOU… BIS central bankers’ speeches | bank of zambia | 2,011 | 12 |
Opening remarks by Dr Bwalya K E Ng'andu, Deputy Governor (Operations) of the Bank of Zambia, at the G&D Workshop on Zambian banknotes, Lusaka, 22 November 2011. | Bwalya K E Ng’andu: Workshop on Zambian banknotes Opening remarks by Dr Bwalya K E Ng’andu, Deputy Governor (Operations) of the Bank of Zambia, at the G&D Workshop on Zambian banknotes, Lusaka, 22 November 2011. * * * Mr. Werner Reisch and all resource persons from Giesecke and Devrient GmbH Acting Director – Banking, Currency and Payment Systems Ladies and Gentlemen I wish to welcome you all to this workshop on Zambian banknotes and in particular allow me to welcome Mr. Werner Reisch and his team from Germany. As Bank of Zambia, we appreciate your efforts to organise this workshop and would like to assure you that by the end of the workshop all participants will have been enriched with new information on cash management. I am reliably informed that this workshop will be divided into two sessions, with this session targeting employees from Bank of Zambia and the next session that will take place tomorrow targeting commercial bank employees. Ladies and Gentlemen, As you may be aware G&D is a reputable printing company based in Germany which has been in existence since 1852. The Bank has a long standing business relationship with G&D going as far back as 1996 when the company first installed the ISS 300 money counting machines in our Currency office and subsequently the BDS 400 banknote destruction system in 2000. The Bank’s relationship with G&D developed further as the company was awarded a contract to print the K10,000 denomination in the 2007–2009 currency supply contract. Currently, G&D are the printers of all banknotes under the 2010–2012 currency supply contracts. Further, G&D are the suppliers of the Bank’s current banknote processing equipment, the BPS 1000 machines integrated destruction system and the off-line BDS 400 destruction system. Distinguished participants, The Bank of Zambia, under the Bank of Zambia Act (1996), is empowered to “issue notes and coins to be legal tender in the Republic and regulate all matters relating to the currency of the Republic”. In line with this function, the Bank pursues a clean note policy which entails effective and efficient management of banknotes. We therefore, welcome this initiative by G&D to conduct this Workshop, which is aimed at empowering the cash handlers from both the Bank of Zambia and the Commercial Banks with knowledge needed for effective and efficient cash management. I have noted that the programme covers topical issues such as Banknote processing, Banknote security features, counterfeit notes, just to mention but a few, which are all relevant to both the Central Bank and Commercial Banks being the main cash handlers. Ladies and Gentlemen, Let me briefly touch on one of the issues that will be addressed at this workshop, that of counterfeit notes. The Bank of Zambia faces challenges in this area, especially with regard to the highest value denomination, the K50,000. However, the volumes are not alarming as evidenced by the prevailing statistics. For instance, the ratio of counterfeit notes in circulation to currency in circulation in the K50,000 is negligible at 0.000036% as at end June 2011. This has been the case for the past five years. Despite the aforementioned statistic, it still remains our responsibility to ensure that this illegal activity is curbed by sensitizing the general public about the genuine security features of the Zambian banknotes. Distinguished participants, the topics that will be addressed at this workshop will provide you with an opportunity to learn modern methods of cash processing. As you may be aware, the Bank has made attempts to automate cash operations. As a result, the Bank acquired the BIS central bankers’ speeches BPS 1000 banknote sorting machines with an integrated banknote destruction system in 2008. The process of automating currency operations is one of the Bank’s key strategic objectives. This workshop provides us with a unique opportunity to share our experiences with the printers of our banknotes and suppliers of the cash processing equipment. Please use this opportunity to tap knowledge from the vast experience and expertise of our resource persons. Finally, I wish to urge workshop participants to actively participate during deliberations of this Workshop. With these few words, it is now my honour and privilege to declare this workshop officially open. I THANK YOU! BIS central bankers’ speeches | bank of zambia | 2,011 | 12 |
Opening remarks by Dr Bwalya K E Ng'andu, Deputy Governor (Operations) of the Bank of Zambia, at the Foreign Private Investment & Investor Perception Survey 2011 Dissemination Workshop, Lusaka, 22 December 2011. | Bwalya K E Ng’andu: Improving the investment climate in Zambia Opening remarks by Dr Bwalya K E Ng’andu, Deputy Governor (Operations) of the Bank of Zambia, at the Foreign Private Investment & Investor Perception Survey 2011 Dissemination Workshop, Lusaka, 22 December 2011. * * * Permanent Secretaries; Chief Executive Officers; Distinguished Participants; Ladies and Gentlemen. I would like to welcome you all, on behalf of the Bank of Zambia, the Zambia Development Agency and the Central Statistical Office, to this Foreign Private Investment and Investor Perceptions 2011 Survey Dissemination Workshop. I want also to take this opportunity to thank the companies that participated in the Survey which was conducted by the three institutions in the third quarter of 2011. The insights and the various valuable revelations on the investment climate in Zambia contained in the survey report were only made possible by their co-operation and support to the process. We want to thank them most sincerely. This dissemination workshop is built around two objectives. The first one is to give representatives of respondent companies the chance to comment on the contents of the report. In this sense, this can be considered as a validation workshop from which inputs into the final version of the report will be received. The second objective is to give the three institutions that commissioned the survey the opportunity to receive feedback on what the community of investors considers to be the main issues in investment. Specifically, it should help the Government through Zambia Development Agency to understand the concerns of investors and formulate, if possible, better strategies for improving the investment climate. As we discuss this report, it is important that we put into perspective some of the reasons why it was decided that a survey of investor perceptions should be carried out. The first reason has been to do with the fact that the perceptions of investors are a good proxy for measuring the investment climate. This arises from them being actively involved in implementation and are, if you like, at the receiving end of existing investment policy. More importantly, existing investors are a country’s most important promoters of investment. Their views on the investment climate are more likely to be trusted by prospective investors than even those of the official investment promotion agencies such as Zambia Development Agency. Some prospective investors may take the view that official investment promotion agencies paint a rosy picture of the investment climate. Existing investors, on the contrary, are presumed to present factual position based on their own experience. Investor perceptions, therefore, are important because where the perceptions are positive, it can reasonably be assumed that those investors will continue to do business in future or probably even expand. Secondly, their positive perceptions can serve as a source of encouragement or comfort to potential investors who might be contemplating investing in Zambia. On the contrary, negative perceptions have the opposite effect. They may dispose existing investors to disinvest. That action alone may serve as the most eloquent statement that all is not well with the investment climate in the country thus risking existing investment and keeping at bay prospective investment. The general findings of the report fortunately are positive. Political stability and governance, economic and regulatory reforms some of which have led to improvements in the business environment, macroeconomic gains reflected in robust GDP growth, low inflation, reduction in budget deficits and relatively stable exchange rate are some of the elements making up the improved investment climate. In contrast to past perceptions which focused on the BIS central bankers’ speeches volatility of the investment climate, high levels of poverty, absence of institutional governance coupled with corruption, the report paints a changed picture. Investors are seeing Zambia as offering a stable and predictable environment with an elected government and functional democracy. It is this positive environment which is seen as explaining why Zambia remained resilient through the financial crisis of 2009 and enabled the country to rebound strongly in 2010. It is noted in the report that foreign private capital inflows into Zambia posted a strong recovery to over US $3.3 billion from a slump of below US $1 billion recorded in 2009. But as we review this report, it is important not to gloss over some of the challenges that must be addressed in order to consolidate this positive environment. These challenges include infrastructural deficiencies in transport, telecommunications and energy, the small market that Zambia presents, constraints to doing business, enduring perceptions of corruption, inadequate skills and talent management. Although the country has seen increase in investment in many sectors such as construction, agriculture and the financial sector, copper remains the major focus of foreign investment. But over-dependence on natural resource wealth and the related commodity prices is not a very sustainable route to growth. This consideration brings into focus one aspect that this workshop should address, that is the need to encourage private investment across many sectors. The country must diversify in such a way that it reduces its present dependence on copper and draws strength from other sectors. We all know the effects of over-reliance on the copper exports on our economy. It remains a source of vulnerability due to price fluctuations in the international market, making the country’s incomes highly volatile. Apart from private investment being a stimulus for job creation, development of local suppliers, skills transfer; it can be a critical source of long-term capital for driving economic diversification. I urge you to reflect on all these issues so that the final document that is produced from this effort will be comprehensive and point to viable strategies that will promote economic diversification through directed private investment. The end result of this workshop will be posted on the website of the Bank of Zambia and Zambia Development Agency. The Zambia Development Agency will incorporate the recommendations submitted from this exercise into its policy recommendations on how to improve the investment climate in the country. With these few remarks, I wish you good deliberations. I thank you… BIS central bankers’ speeches | bank of zambia | 2,011 | 12 |
Remarks by Dr Michael Gondwe, Governor of the Bank of Zambia, at the official opening of the Zambia Union of Financial and Allied Workers (ZUFIAW) Negotiations Forum - Phase 1, Lusaka, 20 March 2012. | Michael Gondwe: Collective bargaining Remarks by Dr Michael Gondwe, Governor of the Bank of Zambia, at the official opening of the Zambia Union of Financial and Allied Workers (ZUFIAW) Negotiations Forum – Phase 1, Lusaka, 20 March 2012. * * * The ZUFIAW President, Mr Cephas Mukuka The General Secretary of the Zambia Union of Financial Institutions and Allied Workers (ZUFIAW), Mrs Joyce Nonde Simukoko The Executive Secretary of Federation of Free Trade Union in Zambia, Mr Lyson Mando The Representative from the International Labour Organisation Workshop Facilitators Distinguished Participants Ladies and Gentlemen I wish to welcome you all to this important Workshop, on Collective Bargaining, organized by the Zambia Union of Financial and Allied Workers (ZUFIAW). Let me take this opportunity to commend ZUFIAW for taking the initiative to organise this Forum, which is intended to facilitate exchange of information and views on aspects of effective collective bargaining. Mr President, as you are aware, in spite of the recent global economic crisis, our country has continued to enjoy relative macroeconomic stability, with favourable prospects for the future. As a result of consistent implementation of appropriate macroeconomic policies: i. The country has registered positive real GDP growth averaging 6.5% annually since 2007. This is a necessary condition for poverty reduction efforts; ii. Inflation and exchange rates developments have also been favourable. Inflation has fallen to single digit, while the exchange rate has remained relatively stable. In 2011 inflation closed at 7.2% from 7.9% in 2010. In February 2012, inflation was recorded at 6.0%; iii. The financial sector has also recorded tremendous growth since the commencement of liberal economic and financial policies in the early 1990s; and iv. Equally, positive developments have been registered in the payment systems. I must caution though that sustaining macroeconomic stability remains a key challenge in the face of a weak global economic outlook and limited domestic resources. It is important that we all keep an eye on economic developments with a view to striking a balance between wealth redistribution on one hand and sustaining the required investment and economic growth on the other. Ladies and gentlemen, in the recent past, we have witnessed a number of work stoppages as workers press for increased remuneration. In this regard, I wish to urge the Union leadership to be wary of sparking a wage price spiral because this may cause a rise in inflation. As you may be aware, high inflation is detrimental to our economy because of the following reasons: i. Makes Planning difficult for economic agents; BIS central bankers’ speeches ii. Companies and consumers are unable to draw up effective investment and expenditure plans; iii. Government is also unable to make good projections of revenue collections and thus unable to effectively plan its current and capital expenditures; iv. Relative prices are distorted leading to inefficient allocation of resources; v. High Cost of Investment as interest rates skyrocket; vi. Savings propensity is low as savers are discouraged by negative real interest rates; vii. In an inflationary economy, interest rates are high and borrowing for investment is inhibited, which leads to: Limited access by productive (private) sectors to investment funds; Low investment, output and employment; and Lesser impact on the social sectors. Ladies and gentlemen, as you share thoughts in this workshop, allow me to underscore the importance, we at the Bank of Zambia attach to capacity building programmes for all employees in the financial sector. I am reliably informed that during the workshop you will cover a number of important topics including the following: i. Analysing the framework for collective bargaining and exploring new trends in collective bargaining; ii. Enhancing negotiation skills and knowledge base of Union Officials; and iii. Developing a pool of professional union negotiators in ZUFIAW. I am fully aware that some of the topics that you will be discussing during this Forum may not be entirely new to you, but I firmly believe that they may be necessary for purposes of reinforcing what you already know. I therefore, urge you all to take keen interest in all the deliberations if you are to realise the full benefit of the workshop. Mr President, no company can sustainably grow if it does not provide mechanisms by which employees can influence their working lives. Labour is more than a commodity. Unlike non-living factors of production, such as, machinery and raw materials, the work of human beings raises questions about the impact of work and work relations. As you review your collective agreement frameworks, I wish to remind you that there are a lot of common interests and important interdependencies between employers and employees despite the apparent conflicting interests. For instance firms need workers and workers need jobs. Ladies and gentlemen, there can be no true bargaining without prudent and effective leadership on either side of the table. This kind of leadership is required for us to achieve our collective objectives. We are desirous of seeing a Union leadership, which is well-informed and constantly upgrading their leadership skills for the attainment of organisational goals and workers welfare. In conclusion, I wish to once again implore you to actively participate and take a keen interest in the deliberations of this Forum. It is my expectation that you will have an opportunity to carry out an appraisal of your individual and collective skills and how they impact upon the job market and workers welfare in the financial sector. With these remarks, Ladies and Gentleman, I declare this Forum officially open. I Thank You BIS central bankers’ speeches | bank of zambia | 2,012 | 4 |
Keynote speech by Dr Bwalya K E Ng'andu, Deputy Governor (Operations) of the Bank of Zambia, to the United Nations Economic Commission for Africa Expert Group Meeting on "Financing small- and medium-scale industries in Africa", Lusaka, 26 June 2012. | Bwalya K E Ng’andu: Financing small- and medium-scale industries in Africa Keynote speech by Dr Bwalya K E Ng’andu, Deputy Governor (Operations) of the Bank of Zambia, to the United Nations Economic Commission for Africa Expert Group Meeting on “Financing small- and medium-scale industries in Africa”, Lusaka, 26 June 2012. * * * • The UNDP Resident Representative, Ms Khanni Wignaraja; • Director of UNECA, Southern Region office, Ms Beatrice Kiraso • The AfDB Representative, Dr Fred Kwesiga; • Officials from the Ministries of Finance of various countries; • Officials from various central banks; Development Banks, Commercial Banks and other financial institutions; • Private Sector Representatives • Participants; • Ladies and Gentlemen; I would like to firstly express my appreciation to the Director of UNECA, Southern Region Office for extending an invitation to me to deliver the keynote address at the start of the Experts Group meeting of Financing Small and Medium Scale Industries. I commend UNECA for this great effort to bring together this assembly of high level officials and experts from Government, the financial sector, private sector and academic institutions to discuss the vexing problem of enhancing financial flows to the SME Sector in Africa. I note from the very elaborate programme for this meeting that you will in the next three days cover a wide spectrum of issues some of which will focus on factors that constrain SMEs access to finance and some of which will focus on what needs to be done to change this situation. The meeting is, therefore, an opportunity for us to face a number of challenges that characterize this sector. These will include revisiting strategies and approaches to SME financing currently in use as much as it will require a review of current institutional arrangements through which finance is directly delivered to SMEs, on one hand, and those which indirectly obstruct or facilitate this flow of resources, on the other. However, I believe that probably the greatest challenge before this assembly is to attempt to narrow the gap between analysis of the problem and the implementation of measures and actions that work. Meetings, workshops, seminars, etc. on SME financing are plenty at national, regional and international levels. Some of you have had the opportunity to attend several of these meetings in the past. Indeed, some of you have become experts at talking about the subject. Barely two weeks ago, the Bank of Zambia held a financial sector forum here in Lusaka at which views of various stakeholders on what needs to be done to address binding constraints to the SME sector were considered. The fact that the discourse on SME financing continues underpins two significant positions. Firstly, it gives recognition to the fact that we are all aware of the potential of this sector in generating employment, promoting economic growth and reducing existing poverty levels. In low income sub-Saharan African countries, SMEs and micro-enterprises make up about 90% of all enterprises. However, due to the various constraints they face, their overall contribution to GDP can in some countries be as low as 20% although estimates show that this could be scaled up to 60% with the greater realization of the sector’s potential. Contribution to employment can be as high as 63%. For most low income countries, SMEs are the main BIS central bankers’ speeches source of jobs and income after subsistence agriculture. Particularly significant is that they are a great source of livelihood for women who own more than half of SMEs while over 70% of Africa’s rural population survives through the formal and informal SME sector. There is little doubt, therefore, that SMEs form a solid basis for sustainable economic development on our continent. Secondly, the continued discourse on SMEs reminds us of the possibility that we have probably done more talking about the problem than fixing it. Although the development of SMEs is varied extensively across Africa, what is clear is that in most countries a major obstacle to their growth is the lack of sustainable and cost effective financial products. South Africa and Mauritius in this region and North Africa have done a commendable job in developing flourishing SMEs sectors. Part of the reasons for success in these countries can be attributed to their modern financial systems and clear policies that support the growth of the sector. However, the fact still remains that for most African countries, a sustainable way of financing SMEs has yet to be found. As I mentioned earlier, the programme for this meeting is broad and extensive. But I would wish to draw your attention to a number of broad areas of reflection which I believe can help in delivering greater finance to the sector. The first area is that there is a need to accept that not all banks can or should even be expected to provide SME financing products. The cost structure and skills orientation simply make some financing institutions completely unsuitable to deliver SME products cost effectively. The implication of this is that greater effort must be placed on developing financial institutions that see SME financing as the core business and therefore set out to develop the expertise required to finance the SMEs successfully. Fairly often the discussion on SME financing is reduced to two diametrically opposed positions. On one hand, SMEs are considered by banks as representing a high risk and therefore, should be avoided or only dealt with cautiously and at a premium price. On the other hand, banks are accused of being inflexible and risk averse and consequently irrelevant to the sector. It is important to understand where the truth lies in these two statements in order to advance the cause of SME financing. Firstly, it is a fact that SMEs present higher credit risk than well-structured corporate entities. SMEs may not have proper accounting records, may have severe governance issues which undermine accountability, have poor access to markets, poor skill levels including financial illiteracy by promoters, lack collateral which the lender can rely on in the event of failure, may not even exist in an appropriate legal form and even the assessment of the viability of a project might be difficult. Lending to SMEs can be a lenders nightmare for bankers. But it is also true that banks which are structured to deal with corporates are risk averse and inflexible when they deal with SMEs. Often when they bring inappropriate risk assessment tools, they may focus too much on collateral rather than project viability. They may even regard SME financing as peripheral to their business. Because of their limited knowledge of SMEs, they experience failure which itself reinforces the notion that SMEs are risky. What we want are financing institutions that are structured to respond to the unique characteristics of SMEs. Specialised SME lending institutions are more likely to handle the risk problem presented by SMEs as a challenge to be overcome with appropriate products and credit risk management strategies and not as a basis for inaction or avoiding the sector altogether. In short, lending strategies which ensure success with corporates do not necessarily ensure similar success with SMEs. Appropriate SME financing institutions must at the very least make lending to SMEs the core business. The second area of reflection that I would urge this meeting to consider is that of building appropriate financing models that have been shown to work in Africa or other developing countries so that we all benefit from the best practices available. In South Africa, for instance, franchising which allows the use of brand names and building capacity have been an BIS central bankers’ speeches important driver of SME financing since it reduces the perceived risk of business failure. Warehouse receipt financing which guarantee loans with agricultural stock are extensively used elsewhere but not as much in Africa. In some countries in Asia, the use of the SME cluster model has helped to increase SME financing by building greater confidence between lenders and SMEs. The cluster model is based on members of an SME entity seeking financing together and providing collective guarantees to financial institutions. The cluster also ensures credit compliance by members while facilitating constant interaction with financial institutions. Naturally, one must guard against the temptation to adopt other experiences without serious reflection – but, what appears desirable is the need to build financing models that are appropriate and therefore can deliver sustainable financing. We do not always require to re-invent the wheel in this process. The third and last area of reflection for me is that we must understand that the constraints that limit the flow of finance to SMEs is sometimes beyond the scope of what financial institutions can do or outside the inherent adverse characteristics of SMEs. There are factors which exist outside the financial system and beyond SMEs which nonetheless affect resource flows. These might include poor infrastructure, bureaucracy which makes it difficult to carry out business, an unattractive tax regime and unclear or unfavourable government policies. Acquiring an appreciation of these factors and appropriately dealing with them can help to foster the efficient use of available financial resources by SMEs, increase their success in the application of credit and therefore give positive feedback to financing institutions which itself encourages them to lend more to the sector. Let me conclude by wishing you all a fruitful three days of deliberations and to reiterate my challenge to you to attempt narrowing that undesirable gap between the identification of problems and the delivering of practical solutions that will enable the flow of appropriate and sustainable financial resources to SMEs to enable them to play their wealth creation and development role in Africa. For me, the SME sector can be a great engine for economic development in Africa. Meetings like this can help in making them become just that. But we must also go beyond just paying lip service to the sector and show true and real commitment to making the sector strong on our continent. I suspect that to go beyond lip service might, in some instances require a paradigm shift on the part of financiers, governments and the players in the SME sector itself. I thank you for your attention!!! BIS central bankers’ speeches | bank of zambia | 2,012 | 6 |
Remarks by Dr Bwalya K E Ng'andu, Deputy Governor (Operations) of the Bank of Zambia, at the launch of the National Strategy on Financial Education for Zambia, Lusaka, 12 July 2012. | Bwalya K E Ng’andu: The National Strategy on Financial Education for Zambia Remarks by Dr Bwalya K E Ng’andu, Deputy Governor (Operations) of the Bank of Zambia, at the launch of the National Strategy on Financial Education for Zambia, Lusaka, 12 July 2012. * * * The Deputy Minister of Finance, Honourable Miles Sampa, M.P; The Minister of Education, Honourable Dr. John Phiri, M.P; The Chief Executive Officer of the Securities & Exchange Commission, Dr. Wala Chabala; The Registrar, Pensions and Insurance Authority, Mr. Martin Libinga; Your Excellencies, Heads and Representatives of Diplomatic Missions invited; Senior Government and financial sector industry officials; Distinguished Invited Guests; Members of the Press; Ladies and Gentlemen. Honourable Ministers, I am delighted to welcome you, on behalf of the three financial sector regulators, i.e. the Securities and Exchange Commission, the Pensions and Insurance Authority and the Bank of Zambia, to the launching of the National Strategy on Financial Education for Zambia. The launch is being done under the auspices of the Financial Sector Development Plan and represents a culmination of a wide range of activities which have been carried out within the scope of the Plan since 2002 with the objective of addressing challenges in the financial sector and strengthening and broadening access to financial services in Zambia. The origins of the Financial Sector Development Plan (FSDP), the vehicle through which the strategy being launched today has been delivered can be traced back to the IMF and World Bank sponsored Financial Sector Assessment Programme studies and the Bank of Zambia Review which were conducted in 2002/3. Following these studies, the Bank of Zambia held various consultations with other financial sector regulators and industrial players to gain buy in and ownership of the proposals that had been recommended for implementation from these institutions. Subsequently, the Government approved the establishment in 2004 of the Financial Sector Development Plan (FSDP) as the institution to deliver the required changes to the financial sector in the country. During the first phase of the programme between 2004 and 2009, the FSDP focused on updating financial laws and research and improving market knowledge of the financial sector landscape. In phase two between 2010 and 2012 focus has been on enhancing financial sector infrastructure which includes the establishment of a national switch, carrying out a law review exercise to modernise and harmonise financial sector laws and developing strategies for increasing competition among service providers so as to favourably influence the cost and quality of service delivery of financial services, increase access to financial services by developing a rural finance policy and strategy and lastly delivering effective financial education. Notwithstanding the work done through the FSDP, the financial sector in Zambia still faces a number of major challenges. Access to financial services among the adult population is at 37.3%, the cost of accessing financial services is still high, the quality of financial service BIS central bankers’ speeches delivery can do with some improvement and financial literacy remains low and presents an important factor in explaining the low level of financial inclusion that we see in the country today. The FSDP, Honourable Ministers, therefore, remains work in progress. I would like, however, to mention some milestones which have been achieved under this programme in order to underscore its potential as a tool for transforming for the better, Zambia’s financial sector landscape. Under the FSDP, we have witnessed the establishment of the Credit Reference Bureau which is beginning to play an increasingly important role in helping financial institutions better manage credit risk, which in turn, should feed into less expensive credit. A draft rural finance policy and strategy aimed at improving finance to rural areas has also been completed and awaits implementation. Another important exercise accomplished has been the law review exercise which has reviewed all existing legislation in the financial sector with the view to modernise, harmonise them and ensure that the different legislations speak to each other rather conflict each other. Consequently, we will be submitting to Government amendments to various laws, including those in banking, insurance and the capital market. Another significant accomplishment under the FSDP has been work done so far in formulating a national strategy for financial education. This initiative grew out of the recognition of the fact that financial institutions and certain NGOs that were engaged in promoting various financial education activities and programme were operating in isolation. What was clearly missing was a coherent and well-co-ordinated strategy among these organisations for delivering an effective education to enhance financial literacy and inclusion. Consequently the FSDP identified the need to develop a coordinated approach to financial education as a meaningful way of bringing progress to this process. It therefore, started its intervention by commissioning a stock taking study of financial education efforts taking place in Zambia in order to establish its true status. DFID provided financial support in the form of technical assistance which enabled the FSDP to recruit FinMark Trust to carry out the study. Subsequently, a report was produced and presented to various stakeholders in November last year. The recommendations from the stakeholders meeting were then sent to the FSDP Steering Committee in April this year. This Committee endorsed the report and it is this report which is being launched today as the National Strategy on Financial Education for Zambia. Once launched, it will be implemented in earnest. Honourable Ministers, the activities that have been carried out under this programme have been made possible by the very generous financial support extended throughout the different phases of the programme by the IMF, World Bank, DFID, SIDA and the Government of the Republic of Zambia. Of course the three regulators, BoZ, PIA, and SEC have also done their bit by seconding personnel to the FSDP Secretariat and taking responsibility for the financial obligations entailed. I want to thank all of them for their commitment and dedication. It is now my singular honour and privilege to call upon the Deputy Minister of Finance, Honourable Miles Sampa, MP to formally launch the National Strategy on Financial Education for Zambia. Thank you. BIS central bankers’ speeches | bank of zambia | 2,012 | 8 |
Opening remarks by Dr Michael Gondwe, Governor of the Bank of Zambia, at the launch of the Soweto branch of Stanbic Bank Zambia Limited, New Soweto market, Soweto, Lusaka, 31 August 2012. | Michael Gondwe: Importance of the SME sector in Zambia Opening remarks by Dr Michael Gondwe, Governor of the Bank of Zambia, at the launch of the Soweto branch of Stanbic Bank Zambia Limited, New Soweto market, Soweto, Lusaka, 31 August 2012. * * * • The Standard Bank Chief Executive for Personal and Business Banking in Africa, Mr Terry Moodley; • The Managing Director of Stanbic Bank Zambia Limited, Mr Dennis Kennedy; • Distinguished Customers of Stanbic Bank Zambia Limited; • Management and Staff of Stanbic Bank Zambia Limited; • Distinguished Invited Guests; • Members of the Press; • Ladies and Gentlemen. I feel honoured and privileged to be amongst you this morning. I wish to thank the Stanbic Bank Management for extending an invitation to me to deliver a keynote address on this important occasion. Ladies and Gentlemen, I would like to begin by applauding Stanbic Bank Zambia Limited for opening the Soweto Trader Branch. I commend Stanbic Bank as I observe that the Trader Branch is specifically designed with the Small and Medium Sized Enterprise (SME) sector in mind. This branch opening fully complements the Bank of Zambia which has set Financial Inclusion as one of its key strategic objectives. It is our expectation that the opening of this branch will provide opportunities for the SMEs to access financial services which for a long time have been lacking in this sector. The fact that Stanbic Bank Zambia is opening its branch in a part of the city where most of the business players are unbanked is victory for the financial inclusion process which seeks to get more Zambians banked and more SMEs access financial products. Distinguished Guests, the role that SMEs play in an economy cannot be over-emphasised. SMEs provide sustainable economic growth through job creation, development of entrepreneurial skills and the potential to contribute significantly to export earnings. However, provision of finance to the SME sector in Zambia still remains a challenge. A survey conducted by the World Bank on Enterprise Development in Zambia (2007) identified poor access to finance as a major impediment to investment and growth in Zambia. Only 16% of firms surveyed reported having a loan or line of credit from a financial institution, compared with 23% for the region and 35% for all countries surveyed. Therefore, while Zambia’s cost of doing business index has progressively improved in recent years, access to finance continues to feature among the three key constraints to investment and growth. It is, nevertheless, gratifying to note that commercial banks in Zambia are slowly realising the importance of the SME sector. You may wish to note that at the end of December 2011, commercial banks’ lending to SMEs was at 21.0% of total loans, an improvement from 17.0% in December, 2010. This also represented an increase in lending to SMEs by 68.9% to K2,322.5 billion from K1,375.0 billion in 2010. Although this trend is impressive, much more needs to be done in order for the sector to meaningfully contribute to the growth of the country’s economy. Provision of finance to the SMEs can be a leading conduit for transforming our economy by opening up business opportunities as well as channelling resources more efficiently and effectively to the sectors that require it the most. BIS central bankers’ speeches Distinguished Guests, To see a commercial bank bring its services to the heart of the informal sector is an encouraging sign not only to the Bank of Zambia but to the entrepreneurs of Soweto Market as it demonstrates the confidence that the Bank has entrusted in the SME sector. It is also our hope that the perception of banks being intimidating to the informal sector will be a thing of the past thus alleviating the challenges faced by SMEs in accessing finance. Furthermore, by partnering with the local entrepreneurs in Soweto Market which is the biggest market in Zambia, Stanbic Bank is encouraging a culture of banking for a myriad of Micro small and medium entrepreneurs. Because of the key role that SME sector plays in the economy, the Bank of Zambia will ensure that financial institutions are fully responsive to the unique characteristics of this sector. The Bank of Zambia attaches great importance to initiatives that seek to enhance the provision of financial services to the underserved sectors of the economy. The opening of this Branch today is a demonstration of this important objective. In recognition of the importance of the financial sector towards national development, the Bank of Zambia has continued to address various weaknesses in the Zambian financial system, among them being the low financial intermediation and limited access to finance. The Bank of Zambia is encouraged to see banks in the country exploring new ways in which they can take banking services where they are needed the most and this is mainly to the unbanked. On its part, the Bank of Zambia has continued to implement measures to reduce the cost of borrowing. In the recent past, the Bank introduced the Policy Rate which is aimed at fostering transparency in the determination of lending rates. Under the new framework, all financial institutions are now required to realign the pricing of loans with reference to the Policy Rate. Furthermore, in January 2012, the Bank of Zambia introduced the new minimum capital requirements for commercial banks. The minimum primary capital was raised from K12 billion to K104 billion and K520 billion for locally and foreign owned banks, respectively. This measure is intended to make commercial banks more resilient to financial instability and provide banks with strong balance sheets that would meaningfully support economic activities in the country. I am pleased to note that Stanbic Bank Zambia Limited was one of the first banks to reduce their lending rates in line with the objective of the Bank of Zambia policy rate. I am also pleased that Stanbic fulfilled the new capital requirements well ahead of the time set for the exercise. Before the end of May 2012 Stanbic had fully met the capital increase requirement well ahead of the deadline of 31st December 2012. We are confident that the measures taken collectively by the Bank of Zambia and commercial banks will provide enhanced scope for more financing at lower cost thereby facilitating further growth of the economy and the SME sector in particular. Ladies and Gentlemen, Let me take this opportunity to appeal to all SMEs and individuals that obtain financing from financial institutions to be responsible borrowers by ensuring that these loans are paid back as the failure to settle obligations destabilises the banking sector and leads to increased cost of borrowing. As you all are aware, banks play a crucial role in financial intermediation and this is enhanced by branch network expansion programs. Thus, there is need for all financial sector players including MSMEs to play their role in augmenting savings mobilization which will in-turn provide the necessary financing to the productive sectors in the economy. In concluding, I would like to encourage banks to seek various ways of supporting the SMEs not only in Soweto Market but in other underserved places throughout the country. For instance Buseko Market in Lusaka and Chisokone Market in Kitwe would offer huge opportunities for banks and other financial players. Let me also congratulate Stanbic bank for introducing the SME Tamanga account and for streamlining processes such as customer BIS central bankers’ speeches evaluation and account opening procedures to cater for the special circumstances of this very important part of our economic sector. It is now my honour and privilege to declare the Soweto Branch of Stanbic Bank Zambia Limited officially open. I thank you for your attention. BIS central bankers’ speeches | bank of zambia | 2,012 | 9 |
Speech by Dr Tukiya Kankasa-Mabula, Deputy Governor (Administration) of the Bank of Zambia, at the Bankers Association of Zambia Bankers Annual Ball, Lusaka, 14 September 2012. | Tukiya Kankasa-Mabula: Bank of Zambia’s key policy initiatives Speech by Dr Tukiya Kankasa-Mabula, Deputy Governor (Administration) of the Bank of Zambia, at the Bankers Association of Zambia Bankers Annual Ball, Lusaka, 14 September 2012. * * * • The Chairperson, Bankers Association of Zambia, Mr Friday Ndhlovu, • Managing Directors and Chief Executive Officers of Member Banks, • Managing Directors & Associations, • Management and Staff of Member Banks, • Distinguished Invited Guests, • Members of the Press, • Ladies and Gentlemen. and Chief Executive Officers of Various Institutions Good evening, Before I deliver my speech this evening, I would like us to observe a minute of silence in honour of the Late Mrs Margaret Ndhlovu, wife of Mr Friday Ndhlovu who passed on late last month. As the saying goes, behind every successful man, there is a woman. Our prayers and thoughts go out to the Ndhlovu family as they come to terms with the loss. Distinguished invited guests, it is my honour and privilege to officiate at this year’s Bankers Annual Ball for the Bankers Association of Zambia. It is also my pleasure to warmly welcome Mr Friday Ndhlovu, the Managing Director of Investrust Bank Plc and the In-coming Chairperson of the Association who is taking over from Ms Charity Lumpa who will be assuming a new role within the Ecobank Group in Lome, Togo. Join me in wishing Mr Ndhlovu well in his new role and I have every confidence that he will perform to distinction. I wish to take this opportunity to thank Ms Lumpa for her able stewardship of the Association and wish her well in her new appointment. I have every confidence that she will excel. Ladies and gentlemen, the banking industry plays an important role in any economy, particularly the role of intermediating funds between savers and borrowers. It also plays an equally important role in providing payment system platform where economic agents can settle their transactions. You will also note that the performance of these functions also attracts numerous risks which have potential to compromise the stability and the efficient operations of the banking industry. The regulatory environment therefore requires adjusting appropriately in response to developments in the financial system. Chairperson, you will note that the Bank of Zambia has, in the most recent past, introduced a number of measures aimed at enhancing stability of the banking industry in Zambia as well as to enhance the transparency and efficiency in the allocation of resource in the economy. Allow me to briefly highlight some of the key policy initiatives that the Bank of Zambia has recently introduced: 1) Reduction of statutory reserve ratios: in the fourth quarter of 2011, the Bank of Zambia reduced both the statutory and core liquid asset ratios by 3 percentage points to 5.0% and 6.0% respectively. The policy measure was intended to loosen liquidity for commercial banks to enable them increase their lending to productive BIS central bankers’ speeches sectors of the economy. The measure was also aimed at influencing the pricing of the loans especially in light of high lending rates prevailing in the economy; 2) Increase in capital: a robust banking industry is indispensable for supporting investments in the economy. A lower capital base entails limited participation in the financing of investments in addition to increased vulnerability of the banking industry. From the last quarter of 2011, the banking sector saw significant regulatory reform as the capital thresholds for banks were increased. Local owned banks are now required to have a capital base of K104 billion whilst foreign owned banks are required to have a minimum capital base of K520 billion. The revised thresholds are aimed at ensuring that we have the best possible environment in which banks can carry out these key functions. As I stated earlier, banks are specialised institutions and they are fundamental to the working of the economy and linked to all parts of the financial system. But the consequence is that if banks fail, the external effects can have an adverse impact on the financial system and the economy. That is why banks are required to maintain a certain level of minimum capital. In this regard, the central bank provides oversight through prudential supervision. Therefore, the measures to revise the capital adequacy framework for Zambia enhances the resilience of the sector to both internal and external shocks by improving the quality and quantity of the capital available for commercial banks; 3) Introduction of the policy rate: the policy rate was introduced in order to provide a benchmark rate for the banking industry on which pricing for lending products can be based. It also promotes transparency in the price discovery mechanisms in the banking sector while minimizing information asymmetry particularly that associated with the credit markets; 4) Statutory Instrument No. 33 on Bank of Zambia currency regulations: This measure was introduced with a view to reinforcing the use of the Zambian Kwacha as the legal tender in the Republic of Zambia. The increased use of foreign currency cash in our economy has implications for the effectiveness of the conduct of monetary policy given that foreign currency cash is outside the control of the central bank; and 5) Currency rebasing: Since 2006, (except in 2008 when there were challenges arising from the global financial crisis) Zambia has enjoyed positive economic variables. For instance, overall inflation has been single digit and the country has continued to record favourable balance of payments surplus. During the recent past, inflation has declined to single digit levels such that in December 2011 it closed at 7.2%. This low level of inflation, coupled with favorable macroeconomic conditions, provided an opportune time to rebase the Zambian currency. Given the improved economic performance, it has become necessary to re-align and configure our currency in line with macroeconomic fundamentals. The currency rebasing exercise will have implications on businesses in the economy including changes to accounting software, tax aspects, ATMs, cash registers, etc. The success of the currency rebasing exercise will largely depend on our partnership with the commercial banks. Ladies and gentlemen, as you will note all these measures are aimed at improving efficiency conduct of business in our economy and commercial banks have a very crucial role to play in all these. The expectation is that all of you represented here will support the central bank to ensure that collectively, we build a financial sector that is modern and responsive to the needs of our economy. Chairperson, as a central bank, we will continue to foster an environment where dialogue between all key stakeholders can be promoted both at individual bank level as well as at Industry level. Despite the policy changes embarked on, there remains a lot to be done in the areas of financial inclusion, financial education and consumer protection in the banking BIS central bankers’ speeches industry. In this regard, the Bank of Zambia has developed branchless banking frameworks and a national strategy for financial education in partnership with other stakeholders. As a regulator, we are committed to ensure an open and competitive banking environment. This is, in my view, the best way to allow banks to play their full role in the economy and ensure a fair deal for businesses and consumers. Recently, we have signed an MOU with the Competition and Consumer Protection Commission aimed at enhancing the competition arrangements in the banking sector. We hope to strengthen capacity to tackle anti-competitive behaviour in the sector. I would therefore, like to encourage you to start viewing these areas as an intricate part of your overall business strategies in order to enable us as an industry to consolidate the gains so far achieved. Ladies and gentlemen, let me acknowledge the commitments that the Bankers Association has made in the revised Code of Banking Practice relating to the provision of “No Frills Account” to certain segments of our population. As the central bank we will be interested to receive information on how you are performing in this important area for financial inclusion. On our part, we have issued a “Practice Note” to assist commercial banks overcome some of the Know Your Customer challenges faced with when dealing with some segments of our society. Chairperson, let me conclude by reiterating the important role that a healthy and stable financial system plays in an economy. This objective cannot be achieved by the Bank of Zambia alone but through collective efforts including the Government and yourselves. My expectations are that although the role of Chairperson has changed, the Association will remain true and steadfast to its values and objectives. We look forward to continuing working with the Association on many issues that still require attention and on-going dialogue. I Thank You. BIS central bankers’ speeches | bank of zambia | 2,012 | 9 |
Opening address by Dr Michael Gondwe, Governor of the Bank of Zambia, at the 4th Annual Celpay Mobile Payments Conference, Lusaka, 12 September 2012. | Michael Gondwe: Mobile payments and mobile banking in Zambia Opening address by Dr Michael Gondwe, Governor of the Bank of Zambia, at the 4th Annual Celpay Mobile Payments Conference, Lusaka, 12 September 2012. * * * • The Chairman of the Board of Celpay Zambia, Dr. Jacob Mwanza • The Chief Executive of Celpay International, Mr. Lazarus Muchenje • Senior Government officials • Representatives of Embassies • Chief Executives Officers of Commercial banks and Financial Institutions • Representatives of International Business Organisations • Representatives of Zambian Business Organisations • Distinguished participants • Members of the press • Ladies and Gentlemen It is an honour and privilege to officiate at the 4th Mobile Payments Conference being hosted by Celpay Zambia Limited under the theme “1st Decade Mobile Payments, 2nd Decade Universal Mobile Banking services”. The Theme for this conference is appropriate and timely as it provides an opportunity for participants, and especially stakeholders, to not only reflect on what has been a decade of tremendous achievement and growth, where major changes have occurred in banking due to the introduction of mobile payments and mobile banking, but also an opportunity to gaze into the future and take a pioneering role in charting out how mobile payments can ultimately provide more banking services remotely, and away from traditional banking. It is now accepted that the advent of the internet coupled with the emergence of mobile phones have greatly enriched the banking experience whilst simultaneously serving as the core technologies assisting Africans and most of the developed world to start accessing financial services. Mr. Chairman, I am extremely proud that this mobile banking and mobile payments revolution that has changed the face of banking forever was started right here in Lusaka, Zambia by Celpay Zambia, who on April 24, 2002 made the very first mobile payment and in doing so ignited a banking revolution that is bringing affordable, accessible payments and banking services to previously financially excluded societies and families. I would like to congratulate Celpay on this momentous achievement and on their 10th Anniversary. I trust that as you go through your deliberations over the next two days, this pioneering spirit will be enthused into your discussions and debates and you will chart the way forward for the next decade so that more banking services can be delivered through this innovative channel to even more people. Ladies and Gentlemen, I would like to take a moment to dwell on the global environment. Since 2008 the world has gone through an unprecedented financial crisis, which led to the collapse of some major global financial institutions and also resulted in some countries requiring significant amounts of debt to bail them out of the crisis. This environment has ameliorated somewhat, but continues to simmer in the Eurozone, where Greece, notably, has gone through some major difficulties. The affected countries in many cases have been the traditional donor and investor countries. The knock on effect of these changes is that many corporations have scaled back on their corporate expansion BIS central bankers’ speeches plans, donor countries and donor organizations have also put in place austerity measures resulting in less donor funding globally. Chairperson, I am sure you would agree that against this background, it becomes imperative to ensure that the financial sector is sound and can withstand shocks, whether from within or external, as well as to have the capacity and capital to support local ventures including large corporate expansion programs. We have seen moves aimed at ensuring stability of the financial sector in places such as Nigeria and Ghana, where the capital requirements for banks were raised in recent times. In Zambia we have also introduced new capital requirements for Commercial banks that have to be in place by the end of this year. I am happy to inform you that the Bank of Zambia is working with each Commercial Bank to ensure that this requirement is met in order to strengthen the banking industry in Zambia. Ladies and Gentlemen, the Bank of Zambia has also embarked on some key projects that shall have a lasting and beneficial bearing on the Zambian economy, such as the rebasing of the Zambian currency as well as the branchless banking initiative. The currency rebasing shall be implemented effective 1 January 2013, and is expected to bring efficiency in the Zambian currency as a medium of exchange and store of value. As you may be aware, the Bank is re-introducing coins which will encourage the use of mechanisms such as pay phones, vending machines, car parking meters and other related technologies. Mr. Chairperson, According to the Finscope Zambia survey conducted in 2009 only 33,7% of Zambian adults have access to financial services, leaving 66,3% financially excluded. This is despite the growth in the number of banks and indeed branches in Zambia. It is obvious that at the current growth rate of the penetration of banking services, if this is left to traditional banks alone, it may mean that the majority of Zambians will be financially excluded for a long time to come. Ladies and Gentlemen, given the above challenge, it is quite appropriate to conclude that the mobile payments industry provides Zambia with a unique opportunity to accelerate the provision of banking services in rural and remote areas at an affordable cost to the Zambian people. To this extent I am happy to inform you that since the enactment of the National Payments Systems Act of 2007, when we only had one designated Payments Business, which was Celpay, the Bank of Zambia has now registered 28 Designated Payments Businesses. The Bank continues to encourage growth of the mobile payments sector and other initiatives that promote financial inclusiveness. For instance, the Bank supports the initiative of Branchless Banking as an innovative way of growing the banking industry. Mr Chairperson, another important facet in the development of the mobile payments industry shall be the ability of the individual payments systems to interoperate and settle real time across different payment systems through shared infrastructure. This should be one of the objectives of the Zambia Payments Systems Association, and therefore urge that the Association adopts this objective as part of their medium term plan. The Bank of Zambia welcomes initiative that will bring down costs and ultimately make mobile payments services affordable to the people. Ladies and Gentlemen, the conference theme looks to the next decade in mobile banking and talks about universal mobile services, I am glad that this theme is being explored here. Our understanding of this theme is twofold: firstly, that in the next decade all adult Zambians will have access to financial services and secondly that financial services shall be available to the majority of our people through this delivery mechanism. This is indeed an ambitious target and can only be achieved through forums like this one where industry experts come together to share ideas and chart the way forward. As the regulator the Bank shall continue to provide policy guidance and regulations that are clear and unambiguous in support of the BIS central bankers’ speeches growth of this industry. Further, our obligations extend to ensuring that as these technological advancements occur: 1. The consumer remains protected; 2. Anti Money laundering and Counter Terrorism Financing regulations are in place; and 3. Business continuity is assured. Chairperson, I wish you good deliberations over the next two days, the Bank of Zambia will be expecting a report from the conference. I wish to thank Celpay for once again arranging and hosting this event, and I congratulate you on your 10th Anniversary. I now declare the 4th Annual Celpay Mobile Payments Conference officially open. I thank you and may you have inspired deliberations. BIS central bankers’ speeches | bank of zambia | 2,012 | 9 |
Keynote address by Dr Tukiya Kankasa-Mabula, Deputy Governor (Administration) of the Bank of Zambia, at the 2012 Month of the Woman Entrepreneur (MOWE) Conference, Lusaka, 26-27 September 2012. | Tukiya Kankasa-Mabula: Accelerating women’s economic empowerment – key to job and wealth creation; sub theme: financial inclusion Keynote address by Dr Tukiya Kankasa-Mabula, Deputy Governor (Administration) of the Bank of Zambia, at the 2012 Month of the Woman Entrepreneur (MOWE) Conference, Lusaka, 26–27 September 2012. * * * • The Chairperson, Zambia Federation of Associations of Women in Business • Senior Government officials present • Country Director UNDP • Chairpersons of affiliated organizations • Distinguished invited guests • Members of the press • Ladies and Gentlemen Ladies and gentlemen, I wish to thank Zambia Federation of Associations of Women in Business (ZAFWIB) for organising this very important conference, with an emphasis on achieving greater financial inclusion for women in general and women entrepreneurs in particular. We commend the focused attention being paid by the ZAFWIB to the subject of this year’s theme for the month of the woman entrepreneur which is: “Accelerating Women’s Economic Empowerment – Key to Job and Wealth Creation” under the sub theme: “Financial Inclusion”. Ladies and Gentlemen, it has been established in many countries that women entrepreneurs play an increasingly important role in the development process of an economy through job and wealth creation. According to the International Finance Corporation (IFC), an estimated 31 to 38 per cent of SMEs in developing countries are owned or run by women. The figures are between 21 and 26 per cent for Sub-Saharan Africa. In other literature, women have been credited with owning 48 per cent of MSMEs in Africa (NFNV). Therefore, women are increasingly being recognised as a powerful source of growth. Indeed, at the Second African Women’s Economic Summit held in Lagos in July 2012, women were recognised as the New Emerging Market. Chairperson, as you may be aware, the Zambian economy has been growing at an average rate of above 5% in the recent past. Most of this growth has been broad based with economic sectors, such as, agriculture, mining, manufacturing and tourism recording impressive growth rates. However, there is potential for further economic growth across all sub sectors if the potential of women entrepreneurs can be harnessed. Limited access to affordable financial services such as savings, loans, remittances and insurance services by the vast majority of the population, especially for women and the SME sector is acting as a constraint to the growth impetus. It is recognised that many women, together with the businesses they run are financially excluded. This is also acknowledged in a 2011 Report by the Gender and Development Division on the study tour to Tanzania and Rwanda, regarding women’s economic empowerment. The Report states that “there is evidence that gender disparities in national development still exist in Zambia and one of the areas of concern is access to finance by women entrepreneurs. In order to address this situation, one of the objectives in the Sixth BIS central bankers’ speeches National Development Plan is to enhance the capacity of women to participate in national development”. 1 The Report further states that “due to weak economic position such as lack of collateral required by most financial institutions, most women, especially the rural women, are unable to access investment capital to engage in business and other economic activities as individuals”. Access to affordable financial services – especially credit and insurance – enhances livelihood opportunities and empowers women and other marginalized groups to take charge of their lives as well as improve their social and economic equity. This is why financial inclusion is considered to be critical for achieving inclusive growth and poverty reduction. What do we mean by financial inclusion Women’s financial inclusion has been described as “a state in which women as individual, members of households and entrepreneurs, have access to the full range of financial products and services from convenient responsible formal service providers, offered effectively, responsibly and sustainably and at a reasonable cost to clients” These products include payments, savings, credit, insurance and pensions. The Finscope survey of 2005 and 2009 showed that access to financial services in Zambia has been low with results indicating only a marginal increase from 33.7% in 2005 to 37.3% in 2009. This signifies that further efforts are required. The 2009 survey also revealed disparities in terms of financial access by gender, with male access at 41% while that of females was at only 34%. This was with regard to access to any financial product, formal or informal. With regard to the formal banking sector, only 14 per cent of Zambian adults were banked. Further broken down, 17 present of Zambian males were banked compared to 12 per cent of females. Distinguished Guests, there are a variety of reasons that have been identified for financial exclusion in our country. In remote and sparsely populated areas with poor infrastructure, physical access itself acts as a deterrent. From the demand side, lack of awareness, low incomes, social exclusion, illiteracy, and lack of collateral among others act as barriers. From the supply side, distance from branches, high transaction costs and cost of borrowing, cumbersome documentation and procedures, as well as unsuitable products, are common reasons for exclusion. Chairperson, some of the challenges faced by women entrepreneurs regarding access to finance have been specifically identified as follows: • Lack of collateral/ discriminatory property rights; • Financial illiteracy; • Lack of awareness of development finance; • Lack of financial confidence; • Lack of appropriate products; • Uncertain business climate; • Inadequate financial skills; • Lack of banking facilities; • Cumbersome application procedures and complicated forms to complete; A Report on the Study Tour to Tanzania and Rwanda, 20–26 June, 2011, Gender in Development Division. BIS central bankers’ speeches • High cost of finance. • Poor gender disaggregated data which limits market information on what women want and need • Most businesses are informal and in lower value areas Bank of Zambia response The Bank of Zambia has responded by putting in place measures to maintain a stable macroeconomic environment which have resulted in significant reduction in inflation; downward movement in interest rates; and a fairly stable exchange rate. The Bank of Zambia is also the lead implementer of the Financial Sector Development Plan on behalf of the Government of the Republic of Zambia. As you may be aware, the Zambian government formulated the FSDP as a comprehensive strategy for addressing challenges in the Zambia financial sector. Under the second phase of the FSDP, access to finance by the various strata of society, including access based on gender is identified as a key weakness to be addressed. The development of the FSDP and its implementation, therefore, reflects the priority attached by the government to this subject. The Bank of Zambia as the lead coordinator for the Financial Sector Development Plan (FSDP) has also incorporated Financial Inclusion as one of the key objectives under its Strategic Plan for the period 2012 – 2015, namely; to increase financial inclusion to 50 per cent of the population by 2015. The strategies under this objective include the following: 1. Develop an index to measure the depth and breadth of financial services in Zambia. Promote agency banking and mobile banking. Develop guidelines for branchless banking framework. Establish a unified collateral registry framework. Establish Financial Education Coordinating Unit (FECU). Undertake financial education interventions specific to BoZ mandate. Revise legal and regulatory framework to promote financial inclusion. Develop incentive mechanisms to encourage outreach of financial services to rural areas and other financially excluded citizens. In order to ensure that persons who are excluded, both in urban and rural areas do not encounter difficulties in opening bank accounts, the know your customer (KYC) procedures for opening and operating accounts has been simplified. The simplified procedure or relaxed „KYC‟ note allows banks to use various forms of reference documentation such as community leaders other than the traditional approach used in the past. In addition, over the years, there have been a number of positive developments in the economy. Some of these include easier access to banking services through lower bank account opening balances; relaxed KYC procedures for opening and operating accounts; improved payments systems through mobile banking, e-money, increased numbers of ATMs and point of sale terminals, and improved access to foreign exchange through various bureau de change across the country. We have also seen a broader range of financial services, including products tailored for women. Under the second phase of the FSDP, Government is implementing a number of programmes, and building capacity for key stakeholders. Specific milestones include: BIS central bankers’ speeches (i) Development of a rural finance policy – a draft report has been developed and among others, focuses on proposals for developing warehouse certificate systems, supporting financial services providers towards rural banking as well as agency banking and initiatives for rural branch expansions (e.g. Natsave). (ii) Establishment of development fund – DBZ is now the appointed apex body for wholesale funds and is also expected to launch an enterprise development fund co-financed with the Zambia Development Agency (ZDA). (iii) Launch of the National Strategy on Financial Education – this strategy which was launched in July 2012 will centre on increasing financial literacy levels in the country with education programmes targeted at children (in schools); youth, male and female adults and MSMEs as well as teachable moments. The Bank intends to partner with Women‟s organisations to ensure proper coverage of women. (iv) Development of awareness campaigns – related to the above, BoZ and other financial sector regulators are involved in awareness programmes through media briefs, trade and commercial shows, radio and TV programmes as well as road shows. The Bank of Zambia has also entered into a partnership with the ILO to implement the FAMOS Check Tool which should assist banks to better serve their FAMOS clients. The Bank has also embraced many stakeholders, including some women’s organisations, onto the FAMOS Implementation Task Force. The Bank has also licensed a credit reference bureau which will ultimately help to create credit histories for financial market participants that may serve as alternative to collateral. Message to women entrepreneurs and women’s organisations I am very pleased with your initiative to engage the central Bank. You should equally engage the financial service providers individually and through their associations to make them appreciate the needs of the women entrepreneurs. You should facilitate training in assertiveness for your members and to take advantage of all available financial literacy education. You should encourage a good credit culture (which is already embraced by many women). You must aspire to grow from the informal to the formal and from SMEs to large corporations. You must not just wait for the targeted funds (which have a role to play) also seek to access other relevant products in the market. Seek to be informed. Make yourselves visible. Message for banks and other financial service providers • Explore the women’s market segment as a viable and profitable segment; • Create innovate products that respond to the needs and wants of the women’s market segment; • Find new ways of mitigating risk; • Promote greater workplace diversity and promote more women into senior management positions; and • Assist women to be more financially literate. On our part, Bank of Zambia will continue to create an enabling environment through policies, legislation and regulation that facilitate greater financial inclusion of women. Chairperson, once again, allow me to applaud the sponsors, led by ZAFWIB, for successfully organizing this important event on the Month of the Woman Entrepreneur for the 8th consecutive year as well as for holding this year’s annual conference. As Bank of BIS central bankers’ speeches Zambia, we are delighted to play a positive role as it is a unique opportunity to build relationships amongst various stakeholders. Let me also, in this regard, implore participants to visit the various stands in the Financial Exhibition and engage the financial service providers for additional insights into the theme for this year’s Month of the Woman Entrepreneur which is: “Accelerating Women’s Economic Empowerment – Key to Job and Wealth Creation” under the sub theme: “Financial Inclusion.” Lastly, I wish to sincerely thank Lee Anne Singh, a woman entrepreneur for graciously providing the exhibition tent free of charge. I would also like to thank the Banks and other financial service providers that have responded at short notice to mount the Financial Exhibition. Take full advantage of their presence here. As I conclude, I wish you all the very best in your deliberations over the next two days, and declare, with these few words, this national conference officially open. I thank you. BIS central bankers’ speeches | bank of zambia | 2,012 | 10 |
Speech by Dr Tukiya Kankasa-Mabula, Deputy Governor (Administration) of the Bank of Zambia, to the Zambia Centre for Accountancy Studies Students, Lusaka, 17 October 2012. | Tukiya Kankasa-Mabula: Stimulating academic development in Zambia Speech by Dr Tukiya Kankasa-Mabula, Deputy Governor (Administration) of the Bank of Zambia, to the Zambia Centre for Accountancy Studies Students, Lusaka, 17 October 2012. * * • Management Staff • Lecturers • Students, • Distinguished Ladies and Gentlemen * Good afternoon to you all, I feel greatly privileged to be here with you this afternoon to share with you the background to my career progression and to also give you an inspirational message that may stimulate you to greater heights. I take this opportunity to thank the management of the Zambia Centre for Accountancy Studies for extending an invitation to me. I always get a satisfying feeling to speak to students, particularly given that I am coming from a background of lecturing. As has been said earlier, I am currently the Deputy Governor Administration at the Central Bank of Zambia. For those of you that may not be too familiar with what the role of the central bank is; the primary role of the Bank of Zambia is, and I quote: “to formulate and implement monetary and supervisory policies that will ensure the maintenance of price and financial system stability so as to promote balanced macroeconomic development”. The functions of the Bank are stipulated in the Bank of Zambia Act and these are as follows: 1. To licence, supervise and regulate the activities of banks and financial institutions so as to promote the safe, sound and efficient operations and development of the financial system; 2. To promote efficient payment mechanisms; 3. To issue notes and coins to be legal tender in the Republic and regulate all matters relating to the currency of the Republic; 4. To act as banker and fiscal agent to the Republic; 5. To support the efficient operation of the exchange system; and 6. To act as adviser to the Government on matters relating to economic and monetary management. As Deputy Governor Administration, my work includes overseeing the Human Resources, Finance, ICT, Audit, Bank Secretariat (Legal, Board Secretarial and Public Relations), Procurement and Maintenance Services, and Security functions of the Bank. Prior to my appointment as Deputy Governor Administration, I was the Bank Secretary. This position entailed being the Chief Legal Advisor to the Bank, Secretary to the Board of Directors and in charge of the Bank’s Public Relations function. My first career was that of an Academic. I lectured Law at the University of Zambia. I then briefly joined the Securities and Exchange Commission as the Director of Licensing and Enforcement before moving to the Bank of Zambia. To say something about my academic qualifications, I graduated with a Bachelor of Laws degree from University of Zambia, thereafter a Master of Laws degree from Harvard where I was a Fulbright Scholar and a PhD from University of London, Centre for Commercial Law Studies, Queen Mary and Westfield College. Allow me to mention that all my studies were done on scholarship. BIS central bankers’ speeches Apart from my work, I am also involved in service to the public and to the Church through sitting on various Bodies. I was not appointed to this position my chance; it took effort and hard work to be noticed. I believed in myself and knew I had to put in the best to achieve anything I wanted to achieve. So what message do I carry for you this afternoon? My Theme is that YOU CAN DO IT! To you the students, I want to encourage you to see yourselves as leaders. You are the future of this nation. You are part of the cream that need to push this country forward. I would like you to realise that academic and professional qualifications are an integral part of settings yourselves up for one’s life. By being here, you are establishing a path for your successful career whether as an employee or an entrepreneur. The knowledge that you are gaining is assisting in developing and enhancing your ability to think and perceive as well as manage the various situations that life offers. The outcome of your academic development will obviously have a positive impact on your family, society, culture and country at large. MAKE SURE YOU TAKE FULL ADVANTAGE OF THIS OPPORTUNITY. It sets the stage for the rest of your future. If you graduate from here with poor grades will mean you have limited your access to top notch institutions, should you, for example, wish to get an advanced qualification. You are limited even to apply for scholarships. And in situations of competition, the best will be selected. ZCAS is one of the renowned institutions in Zambia. One thing you must realise is that not everyone has the opportunity to be enrolled in an institution of higher learning to obtain an academic or professional qualification. Therefore, you must make the best of this opportunity to be here at ZCAS and indeed, be thankful to God. Many of your friends are not able to have this opportunity. I am also aware that for quite a good number, it is a great sacrifice by your parents to send you here. You should ensure that this investment pays off by putting in your best. DISCIPLINE For many of you, this may be the first time that you have experienced so much freedom in your lives. It is the beginning of taking responsibility for your own lives. The importance of being disciplined in both your academic and social life cannot be overstated. I believe there are no capitaos at ZCAS. You must be your own capitao. I entered the University with very good grades. I am forever grateful and indebted to a fellow student who was then in 2nd year who sarcastically told me that there were a lot of brilliant girls who had gone to University only to be redirected after a year due to poor performance. For me, that was the rude awakening of the need to be focused. YOU MUST BE FOCUSSED. YOU MUST KNOW WHY YOU ARE HERE. Avoid indiscipline, and indeed the company of those who are undisciplined. Do not succumb to negative peer pressure both in the academic realm and in the social realm. We are all aware that being socially undisciplined can in fact lead to death. Zambia wants to raise an HIVAIDS free generation. You are a big part of realizing that dream. You need to have strong moral values to stand up for what you know is right, and to do the right thing. In an environment like this one, it is very easy for anyone to fall into the temptation of succumbing to peer pressure and end up in wrong and unpleasant situations. I will take this opportunity to encourage you and reiterate that you observe what you constantly hear, know and see about the campaign against contracting the virus that causes AIDS. We have so much information about the disease to inform each one of you. Each of you, as an individual, has a big role to play in preventing the spread of the disease. Going back to what I said earlier about maintaining high morals, keep away from abusing alcohol, drugs and sex as these are the ingredients that are likely to lead you into high risk behavior BIS central bankers’ speeches such as unprotected sex and cause you to contract the HIV/AIDS. Abstinence is the only 100% effective way to avoid getting infected. WHAT EMPLOYERS WANT Employers want to see in you potential to be a high flyer and willingness to learn new things. Employers want a demonstration of productivity. Employers want to receive a good reference, a transcript that reflects goods results and a qualification from an institution of repute, a qualification that is relevant to their needs. You therefore need to be forward looking even as you select your subject. PLAN YOUR LIVES. Do not have the attitude of FIKAISOLVA. Have a recipe for a successful life. It is never too early. I had decided when I began to study law that I wanted to specialize in commercial law. That path has brought me to where I am today. I must make mention that you are fortunate in that the environment of the college is ideal for learning. I had the opportunity to be taken around the college and I observed that you have modern facilities and equipment that support your learning. Your classrooms have the necessary furniture, the computer laboratory has access to internet and the physical building conditions are solid. FAITH AND WISDOM It is very important not to ignore your spiritual wellbeing. It is what will make you a whole being. I will end by sharing with you a scripture passage from the Paul’s Second letter to Timothy Chapter 2:22–25 “Have no part at all in the wrong things that young men like to do. Believe. Have love. Follow what is right. Live at peace. Do these things along with others who have a clean heart and talk to God.” BIS central bankers’ speeches | bank of zambia | 2,012 | 10 |
Keynote address by Dr Michael Gondwe, Governor of the Bank of Zambia, at the stakeholder consultative workshop, organised by the Technical Education, Vocational and Entrepreneurship Training Authority (TEVETA) of the Republic of Zambia, Lusaka, 18 October 2012. | Michael Gondwe: Skills development as a catalyst for youth employment promotion, income growth, and micro, small and medium enterprises Keynote address by Dr Michael Gondwe, Governor of the Bank of Zambia, at the stakeholder consultative workshop, organised by the Technical Education, Vocational and Entrepreneurship Training Authority (TEVETA) of the Republic of Zambia, Lusaka, 18 October 2012. * * * Chairperson Ladies and gentlemen It is indeed an honour and privilege to make this keynote address on skills development as a catalyst for youth employment promotion, income growth, and micro, small and medium enterprises (MSMEs) development. Mr Chairman Over the recent past, macro-economic stability and appreciable economic growth has been achieved in Zambia as reflected in: i. Positive real GDP growth averaging 6.5% per annum in the last 5 years coupled with rising per capita incomes; ii. Falling inflation, relatively stable exchange rate and downward trend in lending rates; iii. Favourable external sector performance; and iv. Stability and growth in the financial sector; The main challenge that still remains is that of meeting the basic needs of the majority of Zambians, in particular our youth and women, who suffer the brunt of high unemployment. It is for this reason that action is urgently needed to boost skills development in order to enhance productive capacities, investment and decent jobs to sustain the incomes of working families, the poor and the vulnerable. Dear participants The productivity and the quality of work are major determinants of life quality, affecting nutrition, health and education, social protection, and fair treatment. Jobs are particularly important for the poor, whose labour is often their only asset and a primary route to poverty eradication. It is for this reason, that we at the central bank recognise skills development as an economic imperative. This is because it increases productivity of economic agents. Chairperson In the aftermath of the recent global financial crisis of 2008, employment has re-emerged as a top priority area across the world. A large and growing young population can be a driver for economic growth and social progress provided they access quality education and health, and are engaged in decent employment, without which, many young people will not be able to escape negative social vices and poverty. In recognition, of the foregoing, the National Budget for 2013 whose theme is; “Delivering Inclusive Development and Social Justice” has for the first time put job creation at the centre of its development agenda by explicitly targeting the creation of 200,000 jobs in 2013. BIS central bankers’ speeches Sectors targeted for these jobs are agriculture, tourism, manufacturing and construction (including infrastructure). Ladies and gentlemen Sustained efforts to bring in private investment coupled with supportive public policies and investment, would contribute to enhancing productive capacities and generating the much needed jobs in our country. This should be coupled with easier access to credit for productive enterprises - especially micro, small and medium-sized enterprises (MSMEs) – and reforms to foster technological change and productive diversification in line with the changing structure of the global economy. In the above recognition and its continued quest to contribute to unleashing the potential of local MSMEs, the Bank of Zambia hosted a strategic forum on the role of finance in this area, in June this year. As a follow-up, the Government is working closely with stakeholders and the cooperating partners in improving availability of financial resources to MSMEs. Further, some provision has been included in the 2013 Budget. Distinguished participants MSMEs could play an important role in creating employment and spurring growth. However, their competitiveness is undermined by inadequate infrastructure, limited access to financial and business services. Stakeholders can help small firms to integrate in, and reap more benefits from local and international value chains, by facilitating the provision of business services, among which continuous skills development is paramount. An important policy question is how to address the constraints which affect the capacity to grow and generate earnings of MSMEs, very often informal that operate in traditional sectors and account for the bulk of jobs in our country. This feat, ladies and gentlemen, can only be achieved gradually, as the drivers of informality are usually multiple and deeply rooted in long-standing development gaps and weaknesses. Dear participants, We recognised the efforts made by the Government aimed at enhancing a broad spectrum of skills in the country through such institutions as TEVETA. What is required is a more Targeted intervention in order to improve labour market opportunities for individuals by helping them obtain necessary skills and facilitating labour market transitions. Countries that have been most successful in skills development did so by sustaining implementation of coordinated policies linking education systems, skills formation, employment and decent work. These countries include India, Costa Rica, and South Korea. They made quality education broadly available and introduced mechanisms to match supply to the current demand for skills, often by means of linking training providers and employers at sector and local levels. They helped workers and enterprises adjust to change and used skills strategically as a core element of industrial, technology and trade policies to move from lower to higher productivity activities and facilitate investment in new industries. Involving workers and the private sector was a main feature of this approach. Zambia can learn a lot from some of these countries. Effective training systems in conjunction with the private sector should facilitate demand-driven training in sectors and locations with high job growth potential, avoiding bottlenecks and improving employability. BIS central bankers’ speeches Expanding accessibility to quality training is a powerful instrument for empowerment and inclusion of the youth and disadvantaged groups: women, rural dwellers and persons with disabilities. In some cases, apprenticeships in the informal economy can offer many young people an opportunity to learn a trade and enter the world of work. Skills development is a necessary response to the challenge of youth unemployment. Effective programmes should involve packages of training-cum-labour-market-services. These should include: providing advisory services and career guidance, vocational counselling, job-search assistance and job placement, as well as access to different types of training, including combinations of learning and earning through apprenticeships or subsidized employment in return for on-the-job training. Successful entrepreneurship programmes should also involve providing basic business skills and linking would-be entrepreneurs to mentoring, finance and market opportunities. These integrated approaches are needed to assist young people in their transition from school to work and to tackle the multiple constraints they face on the labour market. The need for effective certification cannot be overemphasised. In conclusion, skills development can make a critical contribution to youth employment promotion and income generation through MSMEs. Coordinated policies linking education, skills formation, and employment are required. Well-designed active labour market policies linked with technical and vocational education, on-the-job training and apprenticeships – both formal and informal – are essential for skills development, employment and entrepreneurship and can help alleviate unemployment and underemployment. Connecting training providers and employers can be especially effective at sector and local levels. Further, involving the private sector is essential to employment creation. Furthermore, special attention should be paid to supporting MSMEs as the most dynamic sources of employment. Financial institutions should provide easy access to funds to reduce cost of doing business. The multiple drivers of informality should be tackled through integrated policy packages that promote a gradual transition to formal activities. Ladies and gentlemen, this is the challenge I give all stakeholders that are involved in skills development, youth empowerment and development of MSMEs. Thank you. BIS central bankers’ speeches | bank of zambia | 2,012 | 10 |
Opening remarks by Dr Michael Gondwe, Governor of the Bank of Zambia, at the workshop on "Islamic commerce and finance", Lusaka, 24 March 2013. | Michael Gondwe: Islamic commerce and finance Opening remarks by Dr Michael Gondwe, Governor of the Bank of Zambia, at the workshop on “Islamic commerce and finance”, Lusaka, 24 March 2013. * * * The Guest Speakers, Mufti Shafiq Jakhura and Maulana Bilal Jakhura; Distinguished invited guests; Participants; Ladies and gentlemen; On behalf of the Bank of Zambia and indeed on my own behalf, I would like to extend a very warm welcome to you all to this important workshop on Islamic Commerce and Finance. To our Guest Speakers, Mufti Shafiq Jakhura and Maulana Bilal Jakhura, I wish to extend a special welcome to you to Zambia and in particular to Lusaka. Ladies and gentlemen, the Bank of Zambia is honoured and delighted to be invited to give a keynote address at this workshop. This Workshop on Islamic Commerce and Finance could not have come at a more opportune time than now, when the Bank of Zambia has embraced financial inclusion on its policy agenda as a way of increasing access to appropriate financial products and services to all segments of society in Zambia. Ladies and gentlemen, Islamic commerce and finance have expanded significantly in the last few decades globally both in terms of size and the number of players. For Instance, Islamic finance is currently practiced in more than 50 countries worldwide. In many countries, Islamic finance co-exists with conventional finance and is not limited to Muslim countries. Distinguished participants, recent industry estimates indicate that Islamic finance is set to continue growing at an annual rate of about 15%. The increased trade between the subSaharan region and Islamic nations in the Middle East only reinforces our view that partnerships among the corporate players between the two regions will foster more developments in the area of Islamic finance. Ladies and gentlemen, the Government of the Republic of Zambia (GRZ) recognizes that the limited access to financial services and low number of products available to the different sectors of the economy has hindered the development potential of Zambia’s economy. There is need therefore, to revitalize the financial sector so that it meets the challenges of accelerated and sustained investments in key sectors of the economy. This can only be achieved where the financial system is able to improve its allocative efficiencies by providing appropriately designed products and services to all segments of the population like the Muslim community. Recent developments in the financial sector world-wide offer some encouragement that working together could extend the range and reach of financial services that are available to our people. Still a lot remains to be done to extend financial services to the majority of our people, particularly those that are economically active and to foster ongoing sustainability of our financial institutions. It is against this background that Bank of Zambia accepted your invitation to present the keynote address as a way of marking our commitment to ensuring that the financial system caters for all segments of the population. Distinguished participants, the rapid growth of Islamic finance raises a series of important questions, such as whether Islamic finance should be regulated differently from conventional finance. Because modern Islamic finance is relatively new to most countries, rules for financial accounting, bank governance, and lending standards are continually evolving as business practices become more refined. BIS central bankers’ speeches Ladies and gentlemen, you may wish to note that since October 2008, when the Bank of Zambia hosted the first ever Islamic Banking Conference here in Lusaka, work has been ongoing to develop a regulatory framework for Islamic banking. The Bank has held several consultations both internally and externally and has also subjected the Islamic Banking framework to expert review by internationally renowned Islamic banking experts. The framework is now in its final stages and is expected to become operational before the end of the year. We are aware that the financial sector has waited for so long to start offering Islamic banking products and services. As a central bank, we assure you that the regulatory framework is receiving active attention and the market will be informed once all the formalities have completed. Ladies and gentlemen, although the Muslim Community constitutes only an estimated 12 per cent of Zambia’s population, the community constitutes high value businessmen who control a very significant share of the Zambian economy in various sectors. Their exclusion from the financial sector therefore, has significant impact on the Bank of Zambia efforts on financial inclusion. You may wish to note that the majority of the Muslim community shun the use of commercial banks due to lack of banking products and services that are compliant to their religious ethos and yet they control a significant share of economic activities in all the major sectors. The introduction of Islamic finance may provide a solution to injecting the much needed liquidity currently being kept in homes on account of lack of shariah compliant banking products and services. It is the firm belief of the Bank of Zambia that a robust regulatory framework will not only seek to expand access to finance but will also have positive effects on the overall interest rates in the money markets and ultimately affect the rate at which financing for economic activity is being provided. Ladies and gentlemen, the introduction of Islamic banking would come with its own challenges. For us at Bank of Zambia, this entails further strengthening of our supervisory capacity. We would welcome this challenge and hope to rise to the occasion by providing adequate supervisory infrastructure and a sound environment in which economic agents can conduct their businesses. I have no doubt that this workshop is very timely and that it provides a unique opportunity for participants to share knowledge and experiences on how best to promote financial diversity and inclusiveness especially with regard to Islamic commerce and finance. Distinguished participants, on behalf of Bank of Zambia, I would like to thank the organizers and presenters of this workshop for recognizing the important role that Islamic commerce and finance plays in an economy like ours. It is my hope that all delegates will engage fully in these discussions and make the most of the wealth of knowledge generated in the house. Ladies and gentlemen, It is now my honour and privilege to declare the Islamic Commerce and Finance Workshop officially open. Thank You. BIS central bankers’ speeches | bank of zambia | 2,013 | 5 |
Remarks by Dr Michael Gondwe, Governor of the Bank of Zambia, at the opening ceremony of the Macroeconomic and Financial Management Institute of Eastern and Southern Africa (MEFMI) regional workshop on "Supervision of non-banks and microfinance institutions", Lusaka, 8 April 2013. | Michael Gondwe: Supervision of non-banks and microfinance institutions Remarks by Dr Michael Gondwe, Governor of the Bank of Zambia, at the opening ceremony of the Macroeconomic and Financial Management Institute of Eastern and Southern Africa (MEFMI) regional workshop on “Supervision of non-banks and microfinance institutions”, Lusaka, 8 April 2013. * * * The MEFMI Programme Officer, Distinguished Resource Persons, MEFMI Staff, Participants, Ladies and gentlemen, It gives me great pleasure to officiate at this workshop on Supervision of Non-Bank Financial Institutions and Microfinance organised by the Financial Sector Management Programme of MEFMI. May I take this opportunity, on behalf of MEFMI and on my own behalf, to welcome you all to this important workshop and, in particular, to welcome you to Lusaka. I urge you to make some time to visit and sample some of the beautiful spots that our city and country has to offer. I also wish to welcome and thank our distinguished resource persons Mr. Japheth Katto from Capital Markets Authority of Uganda, Mr. Nkosilathi Moyo from World Vision here in Zambia, Mrs. Rachel Mushosho from the Reserve Bank of Zimbabwe and Mr. Kagisanyo Kelobang from the African Development Bank (AfDB) in Tunis for accepting invitations to present at this workshop and hope that their participation will enrich the deliberations of this workshop as well as increase the knowledge of the participants. Ladies and gentlemen, Non-bank financial institutions are a significant component of the financial sector as their assets constitute a significant proportion of the total financial sector assets in most countries in the region. Similarly, microfinance institutions play a critical role in poverty alleviation and economic empowerment of marginalized communities in our region. As such these institutions are systemically important as they can exacerbate the fragility of the financial system particularly where there is lack of effective regulation. Over the past few years, we have seen a trend where these institutions have increased in numbers in our region; some have been established as part of financial conglomerates while others are on a standalone basis. Sadly, our supervisory and regulatory structures for this sector in the MEFMI region have remained rather incoherent and somewhat underdeveloped to handle the challenges that have been identified with this sector. The trend makes it more important than ever for supervisors in the region to get together and talk about matters of common interest. I am pleased to note that over the past few years, the region has taken a proactive stance towards promoting harmonisation of regulatory and supervisory frameworks and the integration of financial systems. Through MEFMI, SADC, COMESA, the East African Community (EAC) and the West African bloc, member central banks are working together to promote effective supervisory standards geared towards achieving long term goals of financial inclusion and financial stability. BIS central bankers’ speeches Ladies and gentlemen, I note with gratitude that this workshop is designed to address supervisory standards in the non-bank and microfinance sector through three main themes, namely; i) regulatory structures, ii) international trends and standards, and iii) integration of non-banks into the formal sector. These are all very important and topical issues and allow me to talk a little bit more about one of these themes – the development of regulatory structures. First, while there is a definite role for international standards for regulation of this sector, it is very important that they are implemented in a way that takes into account the individual circumstances of each country. Secondly, the standards we adopt should in the end not impede financial sector inclusion. We need to balance this in order to achieve our overall objective which is a sound and efficient financial system. Ladies and gentlemen, It is important not to assume that supervisory arrangements should be, or can be, the same in every country. They must be tailored to the individual circumstances of each country. As an example, what is appropriate for Namibia may be totally inappropriate for another country like Uganda, and vice versa. However, there are likely to be common characteristics that cut across and can enable us all to learn from each other. I do not wish to prescribe what you should talk about throughout this workshop, but I am hopeful that what I have mentioned above can form some discussion points in the deliberations of this workshop. It is also my desire that as you travel back to your respective countries, you would have learnt something you can implement to improve our respective financial systems. In conclusion, as financial markets become increasingly globalised, supervisory co-operation and harmonisation become increasingly important. Organisations such as MEFMI play an important role in developing capacity in the identified areas of macroeconomic and financial sector management. Ladies and gentlemen, Allow me to commend MEFMI which has been in the fore front of building sustainable capacity in financial supervision in the sub-region. It has shown the cause for fostering best practices, raising awareness and helping us to improve our processes especially in this area of financial stability in the region in general. Finally, I hope that you will find this workshop stimulating and that you will enjoy your stay in Zambia. With these remarks, I declare this workshop officially open. I Thank you. BIS central bankers’ speeches | bank of zambia | 2,013 | 5 |
Speech by Dr Michael Gondwe, Governor of the Bank of Zambia, at the official launch of the Zambia National Commercial Bank Limited (Zanaco) Ndola West Branch, Ndola, 27 June 2013. | Michael Gondwe: Economic and financial sector developments in Zambia Speech by Dr Michael Gondwe, Governor of the Bank of Zambia, at the official launch of the Zambia National Commercial Bank Limited (Zanaco) Ndola West Branch, Ndola, 27 June 2013. * * * The Managing Director, Zanaco Members of the Executive Management Team Members of the Press Distinguished invited Guests Ladies and Gentlemen Let me begin by tendering apologies on behalf of the Governor of the Bank of Zambia, Dr. Michael Gondwe who is not able to be with us this evening as he is attending to other commitments. He however requested that I represent him at this important occasion. It is therefore my honor and privilege to officiate at this important occasion to launch the new Ndola west Branch of Zambia National Commercial Bank Limited. I am told that the Branch was initially on Maina Soko Road opposite Barclays Bank and that the bank decided to move here because the place is bigger, which I believe will provide a better and spacious environment. Distinguished Guests, the Bank of Zambia is reliably informed that since the inception of the bank more than 37 years ago, Zanaco has grown its customer base to over 640,000 and has grown its network of branches and agencies to 64, in addition to the branch being launched today, 53 Zanaco Xpress offices and 26 Zanaco agents. The bank has also invested in more than 162 ATMs and 465 Merchant POS terminals. This development demonstrates the bank’s strong and long term commitment to be a significant player and contributor to the development of our financial sector, and the growth of the economy as a whole. The Bank of Zambia wishes to commend the Board of the Bank, Managing Director and his Team for these commendable developments. Ladies and Gentlemen, you will no doubt be aware of the crucial role that banks play in financial intermediation. The real challenge therefore is for all financial sector players to play their honest part in enhancing savings mobilization and to effectively channel the public’s savings to support financing of viable economic activities. as our economy continues to grow and per capita incomes increase, demand for financial services from both the corporate sector and the general public will continue to grow rapidly. Therefore, Zanaco’s wide branch network will strengthen its capacity to meet this growing demand for financial services. Managing Director, Distinguished invited Guests, Ladies and Gentlemen, the Bank of Zambia is always pleased to be invited to occasions such as the one we are witnessing today, because it gives us an opportunity to share with you and the public some of the key developments that are taking place in our financial sector and the economy at large. In this regard allow me to say something about what is currently the most topical issue not only in the financial sector but in the national economy as a whole. This is Statutory Instrument 32 now revised and re-named SI 55 on the Monitoring of Balance of Payments. Ladies and Gentlemen, as the name of the SI suggests, the aim is to “monitor” and not to “control”. There has been much public debate on this subject matter which seems to suggest a public misunderstanding of the intentions of the SI. Some quarters have gone so far as to link the issuance of SI 55 to the earlier issued SI33 as amended through SI78 (Currency Regulations) and concluded that Government is introducing exchange controls. BIS central bankers’ speeches Managing Director, Distinguished invited Guests, Ladies and Gentlemen, allow me to clarify that SI33 was issued with the primary intention of reinforcing the use of Kwacha, which legal tender, for all domestic transactions. This is in line with practice in most countries around the world. The SI has is no way intended to stifle business. The initial Monitoring of Balance of Payments regulations were initially issued under SI 32. When the Government issued SI 32, Bank of Zambia embarked on an exercise to seek the views of the financial system players, the business community and the public at large. Arising from these stakeholder engagements, it became clear that some of the provisions of SI 32 would impede the smooth flow of business. It was also evident that the timeframe within which stakeholders were supposed to prepare for the implementation of the SI was not adequate. The Bank of Zambia therefore compiled all the stakeholder inputs and comments and submitted proposed amendments to Government. Managing Director, I am glad to report that Government responded favorably to the submissions made and have today re-issued the regulations as SI 55, incorporating the majority of the proposed amendments. As you may be well aware, Government extended the date of implementation of the SI to 1st July 2013 from the initial 16th May 2013. I now urge all stakeholders to read the new regulations carefully and make appropriate representations where need arises. The commercial banks in particular will play a critical role in giving guidance to their customers on the Regulations. The SI has already been posted to the Bank of Zambia website which can be accessed from www.boz.zm. Allow me to reiterate that the intention of the Balance of Payments regulations are merely to monitor the flow of funds in and out of the republic with the ultimate aim to provide more accurate data to facilitate decision making on the national economy. Managing Director, The Bank of Zambia will continue to implement and monitor various regulatory measures aimed at enhancing the operations of the banking sector and efficiency in the wider economy and remains committed to support all efforts to reduce the cost of doing business in Zambia. Distinguished Ladies and Gentlemen, allow me to conclude my remarks by reminding commercial banks that they must become proactive in identifying new markets and developing appropriate new products and services, especially for the excluded population if they have to remain competitive and relevant in our fast growing banking sector. As has been echoed at various meetings, the Bank of Zambia has financial inclusion as one of its strategic objectives and initiatives by market players to make this vision a reality are always highly commended. The Bank of Zambia will play its own role and make every effort to create an environment that supports innovation and market developments by financial institutions. Managing Director, distinguished Ladies and Gentlemen, It is therefore, the Bank of Zambia’s expectation that Zanaco and other banks will take advantage of opportunities arising from the general positive economic outlook on account of improving macroeconomic conditions and improvements so far recorded in various sectors of the economy and foster greater developments in the financial sector. Finally, let me extend my gratitude to the Board of Directors and the Managing Director of Zanaco inviting me on this occasion to mark the official launch the Ndola west Branch. It now my honour and privilege to declare the Ndola west Branch officially opened. I thank you. BIS central bankers’ speeches | bank of zambia | 2,013 | 8 |
Remarks by Dr Bwalya K E Ng'andu, Deputy Governor (Operations) of the Bank of Zambia, at the launch of the Access Bank Zambia Limited Visa International Credit Card, Lusaka, 19 June 2013. | Bwalya K E Ng’andu: Benefits, problems and challenges associated with credit cards Remarks by Dr Bwalya K E Ng’andu, Deputy Governor (Operations) of the Bank of Zambia, at the launch of the Access Bank Zambia Limited Visa International Credit Card, Lusaka, 19 June 2013. * * * The Board Chairman, Access Bank Zambia Limited, Mr. Caleb Mulenga; Access Bank PLC Executive Director – Subsidiaries, Mr. Tek Koroye; Access Bank Zambia Limited Chief Executive Officer, Mr. Jekwu Ozoemene; Members of the Diplomatic Corps; Government Officials; Members of the Press; Ladies and Gentlemen It is indeed a pleasure for me to be here this evening to join Access Bank on this important and auspicious occasion marking the launching of the Access Zambia Limited Visa International Credit Card. Through you Chairman, I wish to extend our congratulations to the Bank for this commendable addition to your range of products and services. Undoubtedly, this will go some distance in responding to demands and needs of customers who are looking to benefit from this product with its combination of credit and the application of technology in payment for goods and services. While acknowledging this initiative, I will fall short of presenting the introduction of a credit card service as cutting edge technology, because it is not. As you are aware credit cards have a long established history of extensive usage in many countries around the world, including a number of African countries. But credit cards are not common in Zambia as only a few banks issue them while most cards held by residents have been issued offshore. This initiative taken by Access Bank should directly contribute to an increase in the number of people holding such cards and taking advantage of the range of benefits that can be derived from their use. In countries where credit cards are used extensively, their benefits for users are commonly recognized and include: • Elimination of the risk associated with carrying large amounts of cash as it may be lost or stolen. Credit card companies have over the years developed a variety of anti-theft practices which protect the cardholder in the event of theft of the card. In any case, the cardholder is protected from fraud on the card except in event of negligence on his/her part; • Cards make it easier to buy things as one can pay for a range of goods and services from small items to airline tickets, hotels, car-rentals etc. They are particularly appropriate for online purchases; • Cards offer you additional protection if what you purchased is lost, damaged or stolen as the credit card statement can vouch for the fact that you bought the item even in the absence of the original receipt; • It helps you build a credit line which can be used by the credit reference company to support your creditworthiness when applying for a loan; and BIS central bankers’ speeches • In the case of emergencies, a card can become handy in paying for requirements which may be completely outside your budget. These are some of the basic conveniences of credit cards which will come about with the extensive use of this instrument in this country. Apart from the cardholders, credit cards have other wider advantages which impact on the greater economy. From our perspective as a Central Bank, we are keen to promote the use of non-cash and more efficient payment systems for its convenience, flexibility and security. We consider it as one of the instruments that can contribute to the promotion of financial inclusion as has been clearly demonstrated in other countries where cards are a common tool for the settlement of financial transactions. In the United States, for instance, 80% of households have at least one credit card. In Zambia, with the growing emphasis on trade within the regional economic groupings like SADC and COMESA, plastic money in the form of credit cards, is a very practical way of facilitating settlement of cross border transactions. Another benefit which may be associated, with the more extensive use of e-money is the potential increase in tax compliance among the retail and wholesale sectors. The use of credit cards generates accurate records of purchases which currently may not be captured by the Zambia Revenue Authority because business houses may declare false figures. With the use of a credit card there is no provision to cheat the taxman by refraining from issuing a receipt as the record of the transaction will speak for itself. Whilst on the subject of greater tax compliance, I would want to see some form of requirement for most businesses to use points of sale terminals and other non-cash forms of payment in our shopping malls and central business district businesses where we see a resistance from businesses to embrace this technology in favour of cash. But let me end my remarks this evening by pointing out a number of problems and challenges that might be associated with the use of credit cards. The biggest disadvantage of credit cards is that they encourage the holders to spend money they don’t have. If the credit card does not require that you pay off your balance each month, this balance will accumulate. The longer you wait to settle, the more money you will owe since interest will be charged each month on the unsettled balance. Cardholders therefore need to be careful not use the card liberally. If you think, the card makes you throw caution to the wind as you spend; you might consider leaving the card alone. The possibility of falling into a debt trap is another real danger that cardholders need to watch out for. Interest rates on credit cards can be high. In some countries interest rates on credit cards can be as high as ten times what banks are willing to give on deposit balances. We will keep our sight on what rates apply in the market as a central bank and may even intervene if necessary. But the responsibility of avoiding falling into a debt trap lies primarily with the cardholder. It is prudent to remember that whilst a credit card can make your life easier and can be a wonderful tool for facilitating payments, if you do not use it wisely, it will become a massive financial burden for you. We must learn some lessons from how failure to keep track of purchases and the uncontrollable propensity to spend outside budget, has led to the financial ruin of many people in the developed economies. The last risk, I want to talk about is pertinent to both cardholders and issuers of cards – and that is the risk of credit card frauds. Cards can be physically stolen or credit card numbers can be acquired by thieves over the phone, internet or website and then used illegally to rack up debts. Access Bank must therefore, develop adequate security measures that can protect it and its clients from the crimes which seem to pervade the electronic based payment platforms. To fight this crime, you will need to educate your customers on how to safely and securely conduct transaction using their cards. You will help prevent fraud by educating your customers on what to do when they lose their card or wallet, how to secure their card by, for instance, not giving out credit card information anyhow or on the website and the need to check statements closely. On their part, cardholders must also do their part as responsible BIS central bankers’ speeches cardholders, including paying off balances on credit cards as required, not loaning credit cards to others or divulging credit card information to anyone not entitled to it. Chairman, Ladies and Gentlemen, let me reiterate my words of commendation to Access Bank for introducing this product on the market. It is a great product which when used properly will benefit both the bank and its customers. This outcome is however, predicted on customers using the card wisely and responsibly and on the bank issuing cards to clients after a careful vetting and scrutiny and charging fair interest on the product. Failure to choose creditworthy customers will lead to defaults which may trigger excessive charges. Allow me again to congratulate the Board, Management and Staff of Access Bank Zambia Limited on this important initiative. I thank you! BIS central bankers’ speeches | bank of zambia | 2,013 | 8 |
Speech by Dr Michael Gondwe, Governor of the Bank of Zambia, at the launch of the Mpongwe branch of the National Savings and Credit Bank Zambia Limited (NATSAVE), Mpongwe, 28 June 2013. | Michael Gondwe: Enhancing access to financial services in Zambia Speech by Dr Michael Gondwe, Governor of the Bank of Zambia, at the launch of the Mpongwe branch of the National Savings and Credit Bank Zambia Limited (NATSAVE), Mpongwe, 28 June 2013. * * * The Copperbelt Province Minister, Hon Mwenya Musenge, MP The Mpongwe Area Member of Parliament and Deputy Minister of Foreign Affairs, Hon Gabriel Namulambe, MP; The Copperbelt Province Permanent Secretary, Mr Stanford Msichili; The Permanent Secretary, Ministry of Agriculture, Dr Shamulenge; The Permanent Secretary Ministry of Agriculture, Mr Siazongo Siakalenge; Your Royal Highnesses the Chiefs Present; The Mpongwe District Commissioner; The NATSAVE Chairman of the Board, Dr Chiselebwe Ngandwe; The NATSAVE Managing Director, Mr Cephas Chabu; Distinguished NATSAVE Customers; Management and Staff of NATSAVE; Colleagues from Bank of Zambia; Members of the Press; Distinguished Guests; Ladies and Gentlemen. It is my honour and privilege to officiate at this very important launch of the National Savings and Credit Bank (NATSAVE), Mpongwe Branch. Let me begin by thanking the Board of Directors and Management of NATSAVE for inviting me to this momentous occasion, which marks the official opening of the Mpongwe Branch which is the first ever bank branch in this economically vibrant district. I commend the Board and Management of NATSAVE for the effort in opening this branch which will go a long way in supporting the Bank of Zambia’s strategic objective of increasing financial inclusion. Distinguished Ladies and Gentlemen, the role of financial services in economic development cannot be over-emphasized. It is generally accepted that financial services play an important role in improving income-generating opportunities and overall living conditions among households. Furthermore, better access to finance not only increases economic growth, but also helps to fight poverty and reduces income inequality between the rich and the poor in society. It is for this reason that the role that financial services play in an economy is sometimes compared to the significant role that blood plays in the human body. It should be stressed that no economy can function efficiently, if at all, without financial products and services. The opening of this branch by NATSAVE is therefore expected to spur economic growth and contribute to the ease of access to financial services which has for long time been a hinderence to economic development in this district. We therefore, expect that the opening of this branch will unlock the vast economic potential of this district. Honourable Ministers, the Bank of Zambia attaches great importance to initiatives that seek to enhance the provision of financial services to the underserved sectors of the economy. To BIS central bankers’ speeches this effect, the Bank has continued to implement the Financial Sector Development Plan. The Financial Sector Development Plan seeks to address various weaknesses in the Zambian financial system, among them being the low financial intermediation and limited access to finance. In addition, the Bank of Zambia has incorporated financial inclusion as part of its current strategic plan in which it has undertaken to achieve financial inclusion to 50% of the population of the land by 2015 from the current level of 37.3%. The rationale for this objective is that it responds to the need to bring the poor into the financial system and thereby avail them of the opportunities for financial access and growth. It is expected therefore that this branch we are opening today will play its part in enhancing savings mobilization and effectively channeling the savings to support financing of economic activities. Honourable Ministers, Distinguished Ladies and Gentlemen, the Bank of Zambia has for sometime now, been discussing with commercial banks and financial institutions such as NATSAVE on the need to seek ways and means of introducing branches and agencies in districts which do not have any bank branches or agencies such as Mpongwe, Masaiti, Lufwanyama to name but a few. I am pleased to inform you that, in November 2012, the Bank of Zambia sent a mission to Mpongwe and Masaiti to gather information which could assist in developing a business case for financial institutions to establish branches and support economic activities in these two districts. The report we obtained from the mission provided overwhelming evidence of a viable business case for not only one bank branch but several, to open up in these two districts, especially in Mpongwe district. For instance, the mission observed that in Mpongwe, in the 2011 farming season, the Food Reserve Agency (FRA) paid out a total of K52 billion (Kr 52 million) to small-scale maize farmers while an additional K7 billion (Kr 7 million) was paid to commercial farmers. Coupled with this, total sales from maize alone exceeded about K80 billion (K80 million) if total sales to agents other than the FRA was included. It was further observed that the district produces more maize than the other nine districts on the Copperbelt put together. In addition, it was noted that the payments made to the farmers were growing steadily as evidenced by the increase from K19 billion (Kr19 million) in 2010 to K58 billion (Kr 58 million) in 2011 while members of the Farmers Union had accessed about K2.4 billion (Kr2.4 million) in loans from banks outside the district for the 2010/2011 farming season alone. Furthermore, the Mission reported that 2,700 residents of Mpongwe, comprising Government/Civil Service employees and registered farmers use the financial services located either in Kitwe, Ndola or Luanshya. It must be noted that this number did not include other persons in the productive sector such as private businesses. Distinguished Guests, Ladies and Gentlemen, the report further observed that a total monthly wage bill of about K2.8 billion (Kr2.8 million) was paid out to the residents of Mpongwe in 2011. These funds did not include grants and other sources of funding utilized by various Government organs and private individual and businesses. The area also has a number of commercial farmers including conglomerates such as Zambeef who are engaged in producing crops like wheat, soya beans, barley and maize in large scale and employ a large number of permanent and seasonal workers. The potential for increased investments in agriculture and agro-processing industries is also enormous. The Government’s focus developing the country through infrastructure development will therefore lead to the realization of this potential in the near future. Mr Chairperson, the Bank of Zambia is pleased to see NATSAVE taking up the challenge and setting up this branch where other banks have failed. I am certain that this branch we are unveiling today will very soon become one of the most profitable branches in the entire NATSAVE network. BIS central bankers’ speeches Furthermore, it is heartening to note that NATSAVE is not stopping here but is earmarked to open another branch in Lufwanyama district on July 26, 2013 to increase its total branch network to 32. I wish to assure the Board and the Managing Director of the Bank of Zambia’s utmost support as you expand your outreach to the areas which need financial services the most. I also wish to encourage other players in the banking sector to emulate NATSAVE and set up branches in other unbanked districts throughout the Country. Distinguished Guests, an important element for effective financial service provision is to complement branch expansion with increased product innovation. The ability to offer different types of products to suit the local needs of Mpongwe district will go a long way in enhancing access to financial services in this area. The Bank of Zambia is determined to facilitate viable branch expansion, and the introduction of new and innovative financial products, to tap savings and channel these savings to investment. The Bank will therefore continue to work in close collaboration with the financial sector to cultivate partnerships in order to establish the frameworks and pursue policies that will drive financial innovation, build strong financial institutions and partnerships to ensure a stable financial sector in the country. As I conclude, let me once again again commend the Board and Management of NATSAVE for this enviable initiative of spreading the branch network throughout the country and having presence in economically viable areas such as Mpongwe. I wish to assure you that the opening of this branch will soon result in increased investment, creation of jobs and a growth in profits for the bank. Honourable Ministers, Distinguished Guests, Ladies and Gentleman, it is now my singular honour and pleasure to declare the National Savings and Credit Bank, Mpongwe branch, officially opened. I THANK YOU BIS central bankers’ speeches | bank of zambia | 2,013 | 8 |
Opening remarks by Dr Michael Gondwe, Governor of the Bank of Zambia, at the African Trade Insurance Agency Workshop for Bankers, Lusaka, 10 September 2013. | Michael Gondwe: Facilitating trade and building economies on the African continent Opening remarks by Dr Michael Gondwe, Governor of the Bank of Zambia, at the African Trade Insurance Agency Workshop for Bankers, Lusaka, 10 September 2013. * * * The Secretary General of COMESA, H.E Sindiso Ngwenya; The Director General of Zambia Development Agency, Mr Andrew Chipwende; The ATI Chief Investor Relations Manager, Mr Cyprien Sakubu; The Representative for Zambia, Mr Pizzaro Lukhanda; Resource Persons; Distinguished Invited Guests; Members of the Press; Ladies and Gentlemen. It is my honour and privilege to be amongst you all this morning. I wish to express my appreciation to the African Trade Insurance Agency for extending an invitation to me to deliver a keynote address on this important Workshop. Let me begin by commending the African Trade and Insurance Agency (ATI) for the important role they continue to play in facilitating trade not only in this Country but in the entire Region and indeed the Continent at large. I am no stranger to the role that ATI plays in helping to build economies in the countries that it operates as I have been a client and a supporter of ATI’s products and services in particular in my previous life as Head of the PTA Bank. I have seen first-hand, the impact that ATI has had in many countries, including in Zambia, where ATI has facilitated trade and investments worth more than $925 million since its inception. I am further informed that ATI has so far this year supported Zambian companies and businesses by offering insurance cover to some very large and essential projects primarily in the energy, mining, manufacturing and agriculture sectors valued at over $726 million. The Agency has also continued to assist many African countries by facilitating foreign direct investments with its political risk insurance that protects investors. Ladies and Gentlemen, the role that trade plays in the economic growth and development of a Country cannot be emphasised. There are many regions and countries of the world that have been able to lift their peoples from poverty to prosperity through trade. However, although Africa in general and Zambia in particular has an economy which is characterized by a relatively high degree of openness, trade has not been utilized to an extent of achieving rapid and sustainable economic development necessary to eliminate poverty. This failure for trade to serve as a catalyst for sustainable economic development could be attributed in part to the nature of Africa’s export trade which is heavily concentrated on primary commodities that are characterized by relatively slow growth, price instability and long‐term deterioration of terms of trade. The need for African countries and Zambia in particular to participate in the dynamic sectors of global trade such as manufactures and services cannot be over-emphasised. Some analysts have attributed this lack of BIS central bankers’ speeches trade in service and manufacturing sectors to lack of competitiveness and products that insurer the exporter against any unforeseen losses. The demonstration by ATI of their credit risk insurance products in this workshop will therefore, play a very important role in promoting trade and exports of Non-Traditional Exports which lead to a diversified economy, job creation and sustainable economic growth. The credit risk insurance products also spur trade within Africa by helping our local companies to become more competitive through increased access to credit facilities. ATI has therefore, truly had a significant impact in Africa, which is reflected in the over $10 billion worth of trade and investments it has attracted into the continent over the past decade. Distinguished Guests, Ladies and Gentlemen, as you are aware, staying competitive is what all companies strive to do. Innovation plays a key role in this equation. I am therefore elated that this morning ATI will speak about how it is providing innovative products and services to better suit the needs of banks and financial institutions. I am confident that the strategic partnerships of local banks and ATI will provide an opportunity for growth in credit particularly to the Small and Medium Enterprises which face major challenges in the trade sector. The Bank of Zambia therefore welcomes this Workshop as it bodes well with our strategic objective of increasing access to financial services to 50% of the population by 2015 from the current level of 37.3%. As I conclude, I want to assure ATI that the proposal for the Bank of Zambia and all Central Banks in the COMESA Region to relax the capital reserve rules, by considering applying a lower risk weight on transactions that banks and financial institutions have insured with ATI is receiving active consideration within the organs of the COMESA Central Bank Governors. Let me commend ATI for coming up with this innovative initiative which seeks to deepen our financial markets. Finally, I challenge all of you this morning, especially participants from commercial banks to explore ways on how you can improve your products and services to better serve the entire Zambian population with the products that ATI will present to you this morning. Distinguished Guests, Ladies and Gentlemen, it is now my pleasure to declare the African Trade Insurance Agency’s workshop for bankers officially opened and I wish you fruitful deliberations. I thank you for your attention. BIS central bankers’ speeches | bank of zambia | 2,013 | 9 |
Speech by Dr Michael Gondwe, Governor of the Bank of Zambia, at the official launch of First Capital Bank Zambia Limited and opening of its Head Office, Lusaka, 26 November 2013. | Michael Gondwe: Developing economic and banking opportunities in Zambia Speech by Dr Michael Gondwe, Governor of the Bank of Zambia, at the official launch of First Capital Bank Zambia Limited and opening of its Head Office, Lusaka, 26 November 2013. * * * The Chairperson, First Capital Bank Zambia Ltd, Mr Bornwell Chiyabi; The Vice Chairperson and members of the Board Her Excellency, the High Commissioner of Kenya to Zambia, Professor Rono His Excellency, the High Commissioner of Malawi to Zambia, Mr Bandawe His Excellency the Assistant Secretary General of COMESA The Chief Executive Officer, First Capital Bank Zambia Ltd, Mr. Lalit Tewari; Management and Staff of First Capital Bank Zambia Ltd; My Senior Colleagues from the Bank of Zambia Distinguished Clients and Invited Guests; Members of the Press; Ladies and Gentlemen. It is an honour and privilege to be amongst you at this important occasion this evening. Firstly, allow me to express my gratitude to the Chief Executive Officer of First Capital Bank Zambia Limited for extending an invitation for me to come and officiate at this landmark event. This evening’s occasion marks the official launch of First Capital Bank (FCB) Zambia Ltd as well as the opening of its new head office. Please allow me to congratulate FCB (Z) Ltd on this important occasion. First Capital Bank Zambia Limited, as some of you may be aware, has emerged from the former International Commercial Bank (ICB). This followed a 100% acquisition of the share-holding of ICB from ICB Financial Group holdings AG of Switzerland by a consortium led by First Merchant Bank Ltd (FMB) of Malawi. Afility Investment Ltd, a Zambian controlled investment holding company, is part of this consortium. I am informed that First Capital Bank will be a local bank with 51% shareholding to be held by Zambians. As a matter of fact, First Capital Bank is among seven foreign owned banks which have sought and received approval from the Bank of Zambia to convert to locally owned banks following the new capital requirements. This is a welcome development as it is in line with our Government’s goal of ensuring that Zambians actively participate in the development of the economy. With the launch of FCB at Kwacha Pension House, the two branches of former ICB situated at the corner of Washama and Great North Roads, and Cairo Road will automatically become part of the First Capital Bank. This means that FCB will evolve with three branches in Lusaka. Chairperson I am glad that the transition from ICB to FCB has taken place very smoothly without any loss of jobs. The members of the Board and the new shareholders deserve special commendation for this. I also commend the existing customers of the bank who were steadfast and reposed their confidence in the new shareholders. As I understand, First Capital Bank has plans to increase its foot prints in Zambia and I hope that the bank will open up branches in other districts of BIS central bankers’ speeches Zambia. This will enable it to enhance financial inclusion, which is among the country’s key priorities. Chairperson I have been informed that FCB has initiated the process of acquiring new state of the art banking software, and is in the process of introducing a full range of IT related products like internet banking, mobile banking and visa card. This demonstrates the bank’s strong and longterm commitment to becoming an important player in the development of our financial sector. This is no doubt driven by the confidence FCB has in the Zambian economy. Ladies and gentleman Zambia’s economy has continued to show resilience in the midst of a slowdown in the global economy as a result of the on-going Euro zone debt crisis and the sluggish growth in the United States of America and some leading emerging market countries including the BRICS. Economic performance has been strong with GDP growth in 2012 at 7.3%. Inflation has continued to be in single digits and was 6.9% in October this year. Although the exchange rate of the Kwacha against major international currencies has been under pressure, it has remained relatively stable, while the country has maintained a positive account balance over the last four years. Ladies and gentleman Investors continue to show heightened confidence in the Zambian economy reflected in stronger performance in foreign direct investment (FDI). For instance, the 2013 Foreign Private Investment and Investor Perceptions Survey report shows that FDI inflows rose to US$1.7 billion in 2012 from US$1.1 billion in 2011, the highest in the past 12 years. Similarly, FDI stocks increased to US $12.4 billion from US$10.8 billion over the same period. Data for the first two quarters of this year already indicate a strong performance in 2013. It is therefore, my expectation that the banking sector will continue to take advantage of opportunities arising from the conducive macroeconomic environment in the country to create wealth and contribute to the country’s development. We view increased private investment such as FCB as a stimulus for job creation, technological and skills transfer, as well as wealth creation. This investment by FCB is important given the fact that deposit-taking corporations (banks) have recently become among the top three sectors in the country with respect to FDI. FDI inflows to banks were US$184.4 million, third to manufacturing and mining at US$469.6 million and US $933.7 million in 2012, respectively. Consistently, in terms of FDI stocks, banks were in third place with US$601.2 million while manufacturing and mining were second and first at US$1.3 billion and US$9.0 billion in 2012, respectively. Distinguished clients and invited guests Private investment is a critical source of long-term capital for spurring sustained economic growth and diversification while promoting innovation by supporting the micro, small and medium sized enterprises (MSMEs). Chairperson In order for the financial sector to fully satisfy the credit demands of the productive sector in Zambia, commercial banks must not be overly conservative in terms of their risk appetite for BIS central bankers’ speeches MSMEs. Rather, Banks should seek to better understand the risks associated with lending to these enterprises. Further, it is important that banks better understand the risk associated with lending to specialized and growth sectors such as agriculture, tourism, manufacturing and mining by deliberately developing relevant human resource skills in these sectors. Ladies and gentlemen In its quest to see the financial sector take up an active role in financing the productive sector and facilitating the flow of investment into the economy, the Bank of Zambia continues to undertake a number of policy and structural reforms. Among these reforms is the new increase in the minimum capital requirement for banks to K520 million and K104 million for foreign and local banks respectively. These capital levels are expected among other things to: i. Make the banking system strong enough to withstand shocks and instability in the economy should they occur; ii. Enable banks to underwrite big ticket transactions; iii. Make banks contribute more to the growth of the economy; and iv. Improve access to loanable funds among local entrepreneurs and thereby enable them to partner with foreign investors. This should enhance their economic inclusiveness or participation in the development of the country. Ladies and gentlemen As I conclude, allow me to remind you of the plight of so many of our people living in rural districts. Despite the high economic and business potential in these areas, financial services are non-existant. This means that income earning citizens in the informal sector such as fishermen, bee-keepers, handcraft makers and farmers cannot deposit their earnings in a safe savings account due to the absence of bank branches. In addition, those with good business ideas cannot access loans to actualize their projects and create wealth. These people have to devise unconventional means of keeping their money such as hiding it in their homes, burying or indeed moving with the money where ever they go. Furthermore, civil servants and other citizens in formal employment have to travel long distances and in some instances for a number of days before they can access their salaries. A number of them end up losing their hard earned income in thefts and other calamities. This has to change, and banks working in partnership with the Government can make this happen. I therefore, wish to challenge Commercial banks including First commercial Bank (Z) Ltd to consider opening branches, in the unbanked districts. Banks should take advantage of the attractive economic opportunities obtaining in Zambia to improve financial inclusion and thereby attract new customers and a higher deposit base. I am certain that over time these places will be their most profitable centers as places like Lusaka will only yield narrow margins due to stiff competition. BIS central bankers’ speeches Ladies and gentlemen Allow me to again extend my gratitude to the Chief Executive Officer of the First Capital Bank for inviting me to this auspicious occasion. It is now my honour and privilege to officially declare the First Capital Bank Zambia Limited and its head office officially opened. I thank you for your attention. BIS central bankers’ speeches | bank of zambia | 2,013 | 12 |
Opening remarks by Dr Michael Gondwe, Governor of the Bank of Zambia, at the 2013 SME Local Content and Business Linkage Forum, Lusaka, 28 November 2013. | Michael Gondwe: Encouraging local content and business linkages – role of the financial sector Opening remarks by Dr Michael Gondwe, Governor of the Bank of Zambia, at the 2013 SME Local Content and Business Linkage Forum, Lusaka, 28 November 2013. * * * • The Guest of Honour, Minister of Finance, Honourable Alexander B. Chikwanda, MP; • The World Bank Country Director, Ms Kundhavi Kadiresan; • Senior Government Officials and Development Partners present; • Heads and Representatives of Financial Institutions; • Business Industry and Associations represented; • Distinguished Invited Guests; • Members of the Press; • Ladies and Gentlemen. On behalf of the Bank of Zambia and indeed on my own behalf, I wish to extend a very warm welcome to you all to this very important Forum. Some of you may recall that in June last year, together with the World Bank, we organised a strategic forum for small and medium enterprises (SME) on the “role of finance for unleashing the potential of local Zambian businesses”. The objective of that Forum was to facilitate strategic policy dialogue between the Government, Bank of Zambia, the financial sector and the private sector on issues central to facilitating access to finance by Zambian businesses including SMEs. As Bank of Zambia, we believe that it is important to sustain this dialogue to facilitate an inclusive strategy in the financial sector development. Guest of Honour Following on the success of the 2012 Forum, it was felt that the momentum gained from that forum should not be lost. This Forum is, therefore, a follow up event from the one held last year. The theme of this year’s event is “Encouraging Local Content and Business Linkages: Role of the Financial Sector” Arising from last year’s event, nine major recommendations were made as follows: i. Set up of a credit guarantee facility; ii. Establish a credit line to be provided by a wholesale institution such as DBZ coupled with training for financial institutions; iii. Training for MSMEs/financial education to be an integral part of on-going efforts to support access to finance; iv. Establish a central collateral registry; v. Develop a national MSMEs financing policy; vi. Initiate legal reforms for speedy settlement of commercial transactions and resolution of disputes; vii. Develop incentives for financial institutions that service the needs of MSMEs; BIS central bankers’ speeches viii. Develop a legal framework for consumer protection and data protection; and ix. Monitoring and regulation of Money lenders. I am happy to report that seven out of the nine proposals made have been progressed with the other two still under discussions. The Government and World Bank are already in negotiations for a financing arrangement that may incorporate a form of guarantee scheme and financial education elements while DBZ has been recapitalized and has disbursed some funding through other financial institutions. A legal framework for consumer protection as well as possible incentives have already been taken account of through adequate provisions in the revised Banking and Financial Services Act which is under Government consideration for possible legislation in 2014. Guest of Honour We all agree that one of the major barriers to growth of the SME sector in Zambia is the shortage of financing despite its high potential to catalyze growth and employment creation. It therefore makes business sense that the financial sector should start to look at the financing problems for SMEs in a holistic manner which takes into consideration other developmental constraints which may impede sustainable growth and render the financing ineffective. In line with Government’s desire to enhance local content through SMEs and use of locallymanufactured inputs in the Zambian mining industry, a study in the mining sector is being under taken by the Zambia Local Content Initiative (ZMLCI) facilitated by the World Bank and co-financed by DFID. The goal is to build sustainable collaboration between SMEs and the mining industry. It is our hope that the above initiative will be extended to non-mining related SMEs such as those in agribusiness, tourism and retail. Honourable Minister You may wish to note the following topics that will be discussed during this forum: i. SME Financing and Business Linkages, IFC Experiences in Africa; ii. SME Financing and Experiences and Lessons Learned – AfDB; iii. Promoting Business Linkages in Zambia – DFID Zambia; and iv. SME Financing and Business Linkages in Zambia – Focus Financial Services. Further, the programme will include panel discussions on policy recommendations and an interactive session. The discussion panel will, among others, cover policy issues and outline some possible recommendations for action. Chairperson As I conclude, allow me to thank the presenters and panelists for accepting to facilitate our deliberations at this Forum. I urge all delegates to engage fully in these discussions so that we can collectively develop pragmatic solutions to the financing challenges facing Zambian businesses. Thank you for listening. BIS central bankers’ speeches | bank of zambia | 2,013 | 12 |
Opening speech by Dr Michael Gondwe, Governor of the Bank of Zambia, at the 15th Bank of Zambia Media Seminar, Siavonga, 1 May 2014. | Michael Gondwe: Outline of Zambia’s recent macroeconomic performance and projected outlook Opening speech by Dr Michael Gondwe, Governor of the Bank of Zambia, at the 15th Bank of Zambia Media Seminar, Siavonga, 1 May 2014. * * * Mr Chairman, Distinguished Colleagues from the Media Fraternity, Senior Director – Monetary Policy, Senior Director – Supervisory Policy, Fellow Bank of Zambia Officials, Ladies and Gentlemen. It’s my great pleasure and honour to be with you today at this important Seminar for Professional Media Practitioners. Allow me first, on behalf of the Bank of Zambia, and indeed my own behalf, to begin by welcoming you to this very important event, being the 15th in the Bank of Zambia – Media Seminar Series that we have been conducting for Journalists from across the Zambian media fraternity. Distinguished Colleagues, it is simply not possible to overemphasise the importance of the media to matters affecting national development. You are the window through which the world sees us all. Your reporting conveys important information about the economy, as well as the business environment and financial performance of the country, industries, institutions, households and indeed individuals. This information becomes very useful to a wide range of users in making business decisions. Therefore, as Journalists, you bear a great responsibility of keeping the public as well informed as possible and it is imperative therefore, that you report factually and accurately. It is not for us to remind you that one of the attributes of being factual and accurate is to be able to verify information as much as possible. Ladies and Gentlemen, it is for this reason that the Bank of Zambia finds immense pride in organising this event, whose objectives are to interact with the media so as to: 1. Share information on the role and functions as well as operations of the Bank of Zambia in the Zambian economy; 2. Discuss recent developments in the Zambian and global economy; and 3. Provide an outlook on future economic and financial developments. Through this interaction, we also seek to clarify certain economic and financial terminologies that are frequently used in economic or business reporting. At this juncture, Distinguished Colleagues, allow me to outline the recent macroeconomic performance in Zambia and its projected outlook. The Zambian economy has recorded robust economic growth rates for over a decade now with GDP growth averaging at 6.4% in the last 10 years. This growth has been broad-based, extending beyond the mining sector to the agriculture, forestry and fisheries; manufacturing; construction; transport, storage and communications; and financial intermediaries sectors. In 2013 Zambia’s overall macroeconomic performance was generally buoyant relative to other countries in the region and the world economy in general. Real GDP growth was registered at 6.5 percent in 2013 from 7.3 percent in 2012. The growth was higher than 4.9% and 3.0% growth for sub-Saharan Africa and for the global economy in 2013, respectively. This growth was mainly driven by expansions in the transport, storage and communications; BIS central bankers’ speeches construction; community, social and personal services; financial institutions and insurance as well as manufacturing sectors. In line with the expansion in real GDP, per capita GDP has increased from 332 US Dollars in 2000, to 655 US Dollars in 2005 and 1,784 US Dollars in 2013. We are, however, alive to the fact that more growth is required in order to have a lasting dent on high poverty levels and even more important, there is need to do more to make growth more inclusive and equitably distributed among the citizens of our country. Distinguished Participants, to ensure sustainable economic growth, the Government has been pursuing appropriate macro-economic policies. To this effect, inflation has declined from the double digits of the early 2000s to single digit levels as recorded in recent years. Annual inflation slowed down to 7.1% in December 2013 from 7.3 in December 2012, although it was 1.1 percentage points above the end-year target of 6%. This outturn reflected higher non-food inflation which was moderated by lower food inflation. Higher non-food inflation was largely due to higher fuel prices, coupled with pass-through effects of the depreciation of the Kwacha against the US dollar. During the first four months of 2014 inflation rose to 7.3%, 7.6%, 7.7%, and 7.8% in January, February, March, and April, respectively. This was mainly attributed to the seasonal inflationary pressures associated with food prices during this time of the year, as well as pass-through effects of the exchange rate depreciation. Distinguished Media Practitioners, you will also be interested to note that the Bank of Zambia has been refining its monetary and supervisory tools. The Bank recorded a shift in its Monetary Policy Framework in 2012 from the strict use of monetary aggregates to short-term interest rates, to better anchor inflation expectations. To this effect, the Bank of Zambia introduced a Policy Rate in April 2012 to, among other things, enhance communication of monetary policy direction to the public and introduce transparency in the way commercial banks and other financial institutions price their products. Ladies and Gentlemen, owing to the general decline in the rate of inflation over time, interest rates are expected to decline. However, commercial banks’ average lending rate rose to 16.4% in December 2013 from 16.1% in December 2012 largely reflecting upward adjustment in the Bank of Zambia Policy Rate. The adjustment in the Policy Rate was aimed as containing inflationary pressures attributed to removal of fuel and maize subsidies during the year. In 2013, the average lending rate increased to 17.0% at end-March. As the cost of borrowing is a key factor in facilitating sustainable economic growth and enhanced financial inclusion, it is one of Bank of Zambia’s objectives to see commercial banks’ lending rates eventually trending down significantly. Colleagues, Zambia’s external sector has also registered significant improvements over the last ten years, with notable surpluses recorded over the last five years. This was largely on account of higher growth in export earnings relative to import bills. Total merchandise export earnings have more than doubled over the last five years to 10.4 billion US Dollars in 2013 from 4.5 billion US Dollars in 2008. The increase was driven by a rise in earnings from both metal and non-traditional exports. Metal exports rose by 76.1% to 7.0 billion US Dollars in 2013 from 4.0 billion US Dollars in 2008 due to both improved prices and an increase in export volumes. Non-traditional export earnings posted a stronger growth of 283.6 % to 3.4 billion US Dollars from 900 million US Dollars over the same period. However, the current account surplus narrowed in 2013 as imports grew faster than exports. This is a normal trend in a growing economy as most of the imports are machinery and intermediate goods such as industrial boilers and equipment, petroleum products, chemicals and motor vehicles that are expected to enhance productivity and ultimately increase production. In the foreign exchange market, the Kwacha has been relatively stable in the last few years. However in 2013, the Kwacha was characterised by a depreciating trend against most major BIS central bankers’ speeches trade partner currencies, except the rand. The Kwacha depreciated against the US Dollar by 4.9% to an annual average of K5.39/US$ from K5.14/US$ in 2012. Similarly, the Kwacha depreciated against the Pound Sterling and Euro by 3.6% and 8.3%, respectively. This was partly on account of the US dollar appreciation following the strengthening of the US economy during the latter part of the year. The Pound and Euro weakness moderated on the back of optimism that their economies would continue to rebound. The Kwacha, appreciated against the rand by 10.7% to an average K0.5596/ZAR, reflecting the slowdown in mining output, following continued labour unrest in the South African mining sector. In the first quarter of 2014, the Kwacha depreciated by 10.0% to K6.09 per US dollar. This development was largely attributed to a high demand due to a higher growth in imports relative to exports, as well as investor sentiments associated with the tapering of quantitative easing in the United States of America coupled with falling copper prices on the global markets. Similar weakening of currencies was observed in most emerging market economies such as Ghana, South Africa and Turkey. It should be noted that the Bank of Zambia has continued to implement a market determined exchange rate and has intervened in the market to smooth out volatility and accumulate reserves. According to a recent study conducted by Professor John Weeks of the University of London, there is strong evidence that, the Bank of Zambia’s participation in the foreign exchange market to minimise volatility in the exchange rate has in general been effective. Distinguished Ladies and Gentlemen, with regard to the financial sector, the overall financial condition and performance of the banking sector continues to be satisfactory. On aggregate, the banking sector remains adequately capitalised, while the asset quality, earnings performance and liquidity position remain satisfactory. Further, the financial performance and condition of the non-bank financial institutions continues to be rated fair; while leasing finance companies, microfinance institutions and bureaux de change have had adequate regulatory capital, fair asset quality and liquidity position. Distinguished Friends, apart from the growing number of financial institutions, we have seen a number of innovations and product developments in the banking system. These include a modern and advanced electronic payment and clearing system as well as various financial products such as different types of accounts, loans, financial services and payment methods. These include ATMs whose number increased from 133 in 2006 to 724 at endDecember 2013. Further, a number of mobile phone and internet banking services have been introduced and continue to be introduced in line with the growing global trends. These developments have not only increased competitiveness in the financial sector, but also improved financial access and inclusion across the country. You may also wish to note that the Bank of Zambia, as the financial sector licensing authority, continues to receive numerous applications from institutions seeking to establish themselves in Zambia. Ladies and Gentlemen, Zambia’s economic prospects for 2014 remain strong with a projected growth of over 7 percent. This growth is expected to be mainly driven by agriculture, manufacturing, construction and mining. Manufacturing and mining are expected to benefit from increased capital imports which should increase capacity utilisation, particularly among most mines. High construction activities are expected to be sustained in 2014, mainly in roads, commercial structures and housing estates. With increased output in the growth sectors, Zambia’s external sector is projected to improve supported by continued growth of nontraditional exports. Inflation is expected to be low at 6.5% at the end of the year. Given the foregoing, the medium to long-term economic growth prospects for Zambia remain bright. The country is expected to continue attracting Foreign Direct Investment inflows as it grows. As a result of this robust economic performance and bright future prospects, the Zambian economy recently obtained a US $1.0 billion Eurobond, reflecting continued investor confidence in the country. I am also proud to state that recently, the IMF rated BIS central bankers’ speeches Zambia as one of the fastest growing African economies with growth projected above 7.0 percent in 2014. Ladies and Gentlemen, as the economy grows and as the business environment remains attractive, the need for accurate, current information and news about the domestic economy and financial markets, the region and wider global market becomes ever more critical. It is imperative, therefore, that your reporting is understandable, relevant, reliable verifiable, and comparable. This, in our humble view, requires the conveying of economic, business and financial developments, including the interpretation and expression of complex figures and technical jargon into simpler language for the easy understanding and assimilation by large sections of the population. To help you achieve this all important task, the Bank of Zambia has found it necessary to continue to engage you through this forum. Distinguished Colleagues, the favourable performance of the economy is partly attributed to prudent monetary and fiscal policy and appropriate regulatory framework. In light of this, the Seminar seeks to also re-emphasise the role of monetary policy in the economy, financial sector reforms as well as key aspects of financial inclusion in Zambia. Accordingly, a number of topics have been lined up, which I hope you will find enticing, interesting and informative. Overall, it is my sincere hope that you will find this Seminar fruitful and relevant to your noble profession. Let me thank you all for responding positively to our invitation to come and attend this Seminar. I encourage you all to take very keen interest in the proceedings and to be free to seek clarification on any unclear issues in order to be able to maximize your benefit from this Seminar. With these remarks, allow me to wish you an enjoyable stay and declare this Seminar officially open. I thank you BIS central bankers’ speeches | bank of zambia | 2,014 | 5 |
Speech by Dr Michael Gondwe, Governor of the Bank of Zambia, at the official launch of the 50th anniversary celebrations of the Bank of Zambia, Lusaka, 10 May 2014. | Michael Gondwe: 50 years of central banking in Zambia – repositioning for the future Speech by Dr Michael Gondwe, Governor of the Bank of Zambia, at the official launch of the 50th anniversary celebrations of the Bank of Zambia, Lusaka, 10 May 2014. * * * • Deputy Governor – Administration • Senior Directors and Directors • Representatives from Commercial banks • Members of Staff and Former Members of Staff Present • Members of the Press • Ladies and Gentlemen I would like to extend a warm welcome to you all on behalf of the Bank of Zambia and indeed on my own behalf, to the official launch of the Bank of Zambia’s 50th Anniversary Celebrations, since its establishment on 7th August 1964. The theme for the Bank of Zambia’s jubilee celebrations is “50 Years of Central Banking: Repositioning for the Future”. This is indeed a momentous year for our country, as it will also mark the commemoration of Zambia’s Golden Jubilee. Distinguished Colleagues, the Bank of Zambia has during the last 50 years gone through different phases of transformation and development. I am proud to say that the Bank has, from the time of establishment in August 1964, matured into an institution whose roles have changed to respond to the growing and changing demands of an emerging economy and deal with complexities of globalisation. The staff, past and present should be proud of the useful contribution, you have made towards the steady progress the Bank has made in its quest to attain its mission of “achieving and maintaining price and financial system stability for balanced macroeconomic development”. Ladies and Gentlemen, this progress, has however, not been with any challenges. Among the challenges was, the Global Economic and Financial Crisis during 2008/2009, which adversely affected most economies. It is, therefore, of utmost importance that we reposition ourselves to mitigate these types of challenges should they threaten to recur in the future. Colleagues, this 50th anniversary celebration therefore presents us with an opportunity to reflect on the achievements and challenges of the Bank since its inception. You will recall from my “Town Hall Speech” to members of staff in January 2014 that going forward we need to work harder and build on the successes we have scored in the past, by focusing on enhancing productivity and accountability under what I termed “The New Bank We Need”. In repositioning ourselves, I would like to remind you of some of the tenets we need as the New Bank which include the following: 1. Productivity and accountability; 2. Strong team work operating under set values and ethics; 3. Open and effective communication among staff; and 4. Meeting targets and providing workable solutions. Fellow Members of Staff, Invited Guests, Ladies and Gentlemen, as we move ahead and look to the next 50 years of Central Banking in Zambia, the Bank of Zambia will continue to play catalytic role in facilitating the exchange of ideas among financial sector players and all other key stakeholders. BIS central bankers’ speeches Today, we are here to officially launch the celebrations of 50 years of our existence. I would like take this opportunity to inform you that a number of activities have been lined up to commemorate this wonderful occasion. These include: 1. An international symposium to discuss selected pertinent to the Bank of Zambia and in line with the theme of our celebration, scheduled for 7th August 2014; 2. An exhibition dedicated to the history of the Bank of Zambia; 3. The publication of a book on the History of the Bank of Zambia; 4. The launch of a book on Economic Policies in Zambia; 5. A national school quiz; and 6. A family day to show our gratitude to the families of the members of staff for their support in our execution of the Bank’s mandate. Ladies and Gentlemen, it is our expectation, therefore, that all members of staff will take part in the upcoming activities in order to make the anniversary celebrations a success and memorable. In the same vein, allow me, on behalf of the Bank of Zambia and indeed on my own behalf, to wish the Government, and people of the Republic of Zambia a happy 50th birth year which we will be celebrating on 24th October 2014, and one which has been attained under a tranquil environment and economic progress. Fellow Staff and Invited Guests, I would most likely be in breach of all moral standing if I did not, at this stage, emphasize the Bank of Zambia’s deep commitment to the welfare and well-being of our employees. I implore all of us to aim at leaving a legacy of professionalism and excellence in all that we do. I further encourage all the sportsmen and women participating in today’s events not to despair should they not emerge victorious for one reason or another. Rather, I strongly urge you all to walk away after the games feeling immensely proud that you have been an integral part of a truly momentous and historic occasion. Remember, one can only turn 50 years of age once! Ladies and Gentlemen, allow me to further extend my sincere gratitude to the commercial banks that have sent their representatives to come and attend this event. The support we have received to date has been unflinching throughout the years. We shall continue to work together in order to ensure that the levels of service delivery to our customers is raised and maintained at high standards. Distinguished Guests, this really, is not an occasion for long-winded speeches. It is rather a time when we should be having some fun, watching both our ladies’ football teams from the Ndola and Lusaka offices battling it out on the battle field. Thereafter, it will be the turn of the gentlemen to break a sweat in friendly combat. We naturally expect that when the opportune moment is presented, commercial banks and other invited entities will also produce teams comprising ladies and gentlemen – after all the Central Bank of the Republic of Zambia will soon be showing you precisely how it is done. It is now my honour and privilege to officially launch the commencement of 50th anniversary celebrations of central banking in Zambia. Please enjoy yourselves. I THANK YOU. BIS central bankers’ speeches | bank of zambia | 2,014 | 6 |
Opening remarks by Dr Michael Gondwe, Governor of the Bank of Zambia, at the "Women s Access to Financial Services in Zambia - Dissemination and Consultation Conference", Lusaka, 24 June 2014. | Michael Gondwe: Women’s access to financial services in Zambia Opening remarks by Dr Michael Gondwe, Governor of the Bank of Zambia, at the “Women’s Access to Financial Services in Zambia – Dissemination and Consultation Conference”, Lusaka, 24 June 2014. * * * • Permanent Secretary, Ministry of Finance; • Permanent Secretary, Ministry of Gender and Child Development • Permanent Secretary, Ministry of Commerce • Bank of Zambia Board Members • Your Excellences, High Commissioners and Ambassadors to Zambia present; • The United Nations Development Programme Country Director, Ms Viola Morgan; • The African Development Bank Country Representatives; Dr Freddie Kwesiga; • Representatives from the International labour Organisation (ILO); • Deputy Governor Administration, Bank of Zambia Dr. Tukiya Kankasa-Mabula • New Faces, New Voices Representative, Ms Nomsa Daniels • Chairpersons of the Boards of Commercial Banks, • Chief Executive Officers of Banks and Other Organisations; • Senior Staff and Colleagues from Bank of Zambia; • Members of the Press; • Distinguished Guests, Ladies and Gentlemen. It is my honour and privilege to welcome you all to this conference on Women’s Financial Inclusion in Zambia. May I extend a special welcome to delegates that have come from abroad. I wish you a good stay and hope you will have time to visit the various places of interest and sample the food that Lusaka offers. Ladies and Gentlemen, the Conference is a dissemination and consultation forum aimed at presenting and reviewing the findings of a study on “Women’s Access to Financial Services in Zambia”. This conference is therefore a platform for reflection and consultation among various stakeholders present here today. Bank of Zambia recognises that an insight into the Women’s Access to Financial Services is critical to overcoming existing barriers to financial inclusion and devising appropriate strategies for empowering the women to realise their full economic potential and contribute to as well as benefit from the economic growth that the country is enjoying. It is in this regard that the Bank of Zambia commissioned the study on “Women’s Access to Financial Services in Zambia”. I invited New Faces New Voices to replicate the study on “Women’s Access to Financial Services in Mozambique” that was conducted for the Central Bank of Mozambique in 2013. Ladies and Gentlemen, Specifically, the study is expected to provide in depth understanding on the following two perspectives: 1. Understanding gender perspectives on usage of financial services; levels and trends, sources of finance; formal, semi-formal and informal, financial products provided; credit, savings, insurance, remittances, mobile banking and other financial products and services. The regional distribution; rural versus urban and the awareness versus BIS central bankers’ speeches understanding and perceptions of access to finance, the constraints, opportunities for financial education, financial decision making process, and household dynamics that confront women. 2. Understanding the types of financial products and services available in terms of; – the types of providers, the services which are regularly or less frequently used, services which are paid for and for how much, and challenges in accessing the financial products and services. As Bank of Zambia, we believe that this study will also contribute to the documentation of information relating to financial inclusion. The information is important to aid in policy formulation by the government and potentially inform business strategy of financial service providers to reach out to the un-banked citizens. We encourage other stakeholders to contribute to this necessary body of knowledge in our financial sector. Financial inclusion for the majority of our people, especially women, is a corner stone of our financial sector development. The Honourable Minister of Finance in his 2014 National Budget address, set the stage by emphasising the need to accelerate broad based growth, diversification of the economy and the entrenchment of social justice so that all Zambians, rural or urban, male or female, young or old and including the differently abled, benefit from and contribute to national development. Ladies and Gentlemen, it has been reported at various fora that our women continue to face challenges in accessing financial products and services. These barriers range from cultural, legal, financial and sometimes religious discrimination among others. However, access to finance and financial services in general, has in the recent past been cited as a major challenge to the participation of women in economic development. As you are aware, finance can be looked at as the oil that lubricates smooth economic growth and therefore any impediments to accessing this important resource has an adverse impact on the country’s economic growth prospects. The Study and this Conference have come at an opportune time when we are focusing on enabling all Zambians to be empowered financially and ultimately economically so that we reduce the high levels of poverty in the country. I have no doubt that the findings of the study, will stimulate profound discussions which will shape the efforts going forward on financial inclusion and promulgate the financial inclusion agenda to all Zambians. Distinguished Guests, Ladies and Gentlemen, It will, however, take deliberate policies and long-term commitment from all stakeholders beyond the study for us to ensure financial inclusion of women. It will further require constant review of the policies, re-assessment of priorities, and adequate financial resources to effectively implement interventions to promote women’s access to finance. This entails integration of gender-specific perspectives at the design stage of policies and programmes to provide for inclusion of clauses more equitable access to financial assets and services by women. In the past few decades, the state of the financial sector in Zambia has been characterised by low financial intermediation that witnessed limited access to financial services particularly for the rural population and the low-to-middle income earners, high cost of funds and underdeveloped money and capital markets. However, the improvement in the macroeconomic environment and positive economic growth has resulted in great strides in the development of the financial services and financial sector in general. The Government of the Republic of Zambia through the Ministry of Finance and Bank of Zambia has been putting in place measures to maintain a stable macroeconomic environment which have resulted in low inflation and a decline in interest rates in recent years. Except for the volatility of the Kwacha exchange rate against other currencies experienced in recent months, the exchange rate has been fairly stable over the years. We remain confident that the economy is on a robust footing and the end year inflation target of 6.5 per cent is attainable. The Bank of Zambia will continue to be vigilant and take appropriate measures to support the stability in the macroeconomic environment. BIS central bankers’ speeches Ladies and Gentlemen, the strong economic performance has culminated in growth in both the number of financial services providers and the financial products in the country. However, the level of financial inclusion still needs to be broadened further. The evidence from the FinScope Demand Surveys revealed that as at 2009 only 37 per cent of the adult Zambian population was financially included. This signified a 3.6 per cent marginal increase from 33.7 per cent in the 2005 survey. The FinScope study further revealed that access to finance for women was relatively poor in relation to their male counterparts. This study being presented today is, therefore, a welcome opportunity to reflect on the progress since 2009. Financial institutions have a role to play in ensuring financial services and products are available at reasonable terms, including fair and practical know your customer (KYC) assessments, the use of alternative collateral and flexible lines of credit to mention, but a few. To enhance income-generating activities from survival level to strong and viable businesses, in particular for women led enterprises, access to credit, banking and financial services and facilities is essential to fully develop small scale to businesses. The firm, robust and sustainable growth can only be founded on strong and viable Small and Medium Enterprises hence the need to financially empower enterprises is cardinal through financial inclusion. This lack of access to finance by our entrepreneurs is a major concern for both, the Bank of Zambia and Government. Ladies and Gentlemen, Allow me to outline some of the measures the Bank has been putting in place to accelerate access to finance for all citizens generally, and in particular for women The Bank of Zambia is the lead implementer of the Financial Sector Development Plan on behalf of the Government of the Republic of Zambia. As you may be aware, the Zambian government formulated the FSDP as a comprehensive strategy for addressing challenges in the Zambian financial sector. Under the second phase of the FSDP, access to finance by the various strata of society, including access based on gender is identified as a key challenge to be addressed. The development of the FSDP and its implementation, therefore, reflects the priority attached by the Government to this important endevour. It’s also worth noting that the Bank of Zambia has incorporated Financial Inclusion as one of the key objectives under its Strategic Plan for the period 2012 – 2015, namely, to increase financial inclusion to 50 percent of the population by 2015. Ladies and Gentlemen, the strategies under this objective include the following: 1. Developing an index to measure the depth and breadth of financial services in Zambia; 2. Promoting agency banking and mobile banking; 3. Developing a framework for branchless banking. 4. Establishing a unified collateral registry framework; 5. Undertaking financial education interventions; 6. Revising legal and regulatory framework to promote financial inclusion; and 7. Developing incentive mechanisms to encourage outreach of financial services to rural areas and other financially excluded citizens. The Financial Education Coordinating Unit (FECU) has been established at the Bank to spearhead the financial literacy campaign across the country. The Bank of Zambia has also facilitated for persons who are excluded, both in urban and rural areas not to encounter difficulties in the opening of bank accounts by simplifying the know your customer (KYC) procedures for opening and operating bank accounts. The simplified procedures or relaxed “KYC” note allows banks to use various forms of reference documentation such as community leaders other than the traditional approach that required lawyers, commissioner of oaths, government officials and other officials or institutions. The Bank has also licensed a BIS central bankers’ speeches credit reference bureau to help create credit histories for financial market participants that may serve as alternative to collateral. In addition, it has now become easier to access banking services through lower bank account opening balance, improved payments systems through mobile banking, e-money and increased numbers of Automated Teller Machines and Point of Sale terminals. Ladies and Gentlemen, the Bank of Zambia has also partnered with the International Labour Organization (ILO) to promote the use of the FAMOS Check Tool by financial service providers in order to enhance access to finance by women entrepreneurs. The tool is intended to enable financial service providers undertake a systematic assessment of the extent to which these institutions target women entrepreneurs, their needs and potentialities. The tool also assists financial service providers to develop appropriate strategies to extend their outreach to women entrepreneurs as well as develop products to meet the needs of women entrepreneurs. In this collaborative exercise, ILO has since facilitated capacity building within the Bank of Zambia and certified some members of staff to undertake the FAMOS training within the entire financial sector. Commercial Banks have been expected to utilize the tool and use the results to tailor services and products that reach out to women. However progress made in this area could be improved. There is an urgent need therefore to reinvigorate the FAMOS check tool. Bank of Zambia will continue to encourage financial institutions to administer the FAMOS check tool and the cooperation of all stakeholders in this regard is vital. The Bank of Zambia will continue to create an enabling environment through policies, legislation and regulation that facilitate greater financial inclusion of women. You may wish to know that the Bank has taken on board gender mainstreaming as part of its strategic plan, essentially to have a pluralistic approach that values the diversity among both women and men. Ladies and Gentlemen, let me remind you that Zambia has affiliated itself to conventions and initiatives that have the specific intention of enhancing the welfare of women. The Bank of Zambia will continue to take the role of the provider of an enabling environment that enhances access to finance and financial services by all, especially those that have been traditionally excluded like the economically active poor women whose entrepreneurial prowess needs to be harnessed in order to reduce poverty and increase the economic welfare of our people. Bank of Zambia is therefore delighted to be associated with this study and conference which provide a unique opportunity to listen to findings of the study and exchange ideas on the various outcomes from the study. It is my hope and trust that you will take advantage of this forum to initiate dialogue between Women Entrepreneurs and women in general and the various other stakeholders to propose mechanisms to accelerate women’s access to finance. This is an opportunity also for women to discuss challenges faced in accessing various financial products and services. Equally, it is an opportunity for other stakeholders, especially financial services providers to enlighten all of us on financial products and other services on offer to mitigate the challenges women face. May I take this opportunity to thank the partners who financed and supported the study and conference: Financial Sector Deepening Zambia Germany Cooperation/GIZ, New Faces New Voices, and Making Finance Work for Africa. The Bank of Zambia looks forward to continued cordial relations and partnership in fostering developments in the area of financial inclusion for women and other areas of cooperation. Ladies and gentlemen, as I wish you all a successful conference, it is now my honour and privilege to declare the conference officially opened. I thank you. BIS central bankers’ speeches | bank of zambia | 2,014 | 7 |
Speech by Dr Denny H Kalyalya, Governor of the Bank of Zambia, at a workshop on "Cyber Security in the Financial Services Sector", jointly conducted by the Macroeconomic and Financial Management Institute of Eastern and Southern Africa (MEFMI) and the Bank of Zambia, Lusaka, 6 May 2019. | BANK Of ZAMBIA CYBER SECURITY IN THE FINANCIAL SERVICES SECTOR WORKSHOP SPEECH BY DR. DENNY H. KALYALYA GOVERNOR – BANK OF ZAMBIA MONDAY, 6th MAY 2019 INTERCONTINENTAL HOTEL, LUSAKA, ZAMBIA CYBER SECURITY IN THE FINANCIAL SERVICES SECTOR WORKSHOP, SPEECH BY DR. DENNY H. KALYALYA, GOVERNOR – BANK OF ZAMBIA – 6 MAY 2019 Chief Executives of Financial Institutions in Zambia, Representatives from MEFMI, Members of staff from Bank of Zambia and other Financial Institutions Distinguished Resource Persons, Dear Participants, Ladies and Gentlemen. I am honoured to welcome you all to this important workshop on “Cyber Security in the Financial Services Sector”, which is being jointly conducted by the Macroeconomic and Financial Management Institute of Eastern and Southern Africa (MEFMI) and the Bank of Zambia. This workshop aims to discuss financial sector vulnerabilities arising from cyber threats and risks and to develop the necessary skills and tools to make the sector resilient. Let me take this opportunity to extend a special welcome to our facilitator Dr. Rukanda. I am sure the delegates will greatly benefit from your experience and vast knowledge on the subject. Ladies and gentlemen, as you are all aware, Information and Communication Technology (ICT) have over the years permeated all aspects of our lives and in particular, have become the mainstay of the world’s financial sector infrastructure. While these ever emerging technologies such as Digital transformation, Artificial Intelligence, Internet of Things, Cloud Computing, Enterprise Mobility and Mobile Banking, have brought about efficiency and increased innovations, they have also exposed the financial services sector to cybercrime. Some notable incidents of 1|Page cybercrime include, the attack on the Central Bank of Bangladesh, Russian retail bank and seven banks in the United Kingdom. The financial services sector is a key target by criminals because it is the custodian of large amount of funds in the economy. For this same reason, the financial services sector has to also deal with other types of risks, which among others include, fraud, extortion, money laundering, illicit financial flows, market manipulation, data theft, and currency attacks. With statistics showing an increase of cyber-attacks in the financial sector, the importance of ensuring that our institutions are cyber resilient cannot be over-emphasized. Ladies and gentlemen, the financial services sector has to see cybersecurity for what it is, a large scale operational risk deserving the utmost attention and thus develop the necessary systems and cultures throughout the sector to deal with this risk. Key to the development and operation of these systems and cultures is the need to nurture talent capable of addressing cyber security threats through prompt detection, investigation, reporting, prosecution and prevention. Distinguished participants, let me also emphasize that cyber risks should be viewed from an enterprise-wide perspective. ICT, Security, Operations, Credit Control, Anti-Money Laundering and Fraud Investigation departments need to break down the various silos to facilitate faster detection and prevention of cyber financial crimes. No single department or function can be an island in this battle. In the same vein, no bank or financial institution can be an island. One financial institution brought down by a cyber-attack would impact other banks and could ultimately destabilize the entire financial sector. It is for this reason that I call upon all CEOs 2|Page here present to ensure that Cyber Security is entrenched in our day-to-day operations and strategic plans. Ladies and gentlemen, I am aware that other countries have set up Computer Incident Response Teams (CIRTs) for various industries, including the Financial Sector. It is high time that we seriously begin to consider setting up a financial sector CIRT in Zambia. I believe that the CIRT would, not only assist in ensuring that all financial institutions are collaborating and working as one in mitigating cyber risks, but also enable information sharing. I am therefore calling upon Bankers Association of Zambia to work with Bank of Zambia to ensure that this is achieved. Ladies and gentlemen, I wish you the best and I encourage you to participate actively during the presentations and discussions. Use every opportunity to tap into the vast experience of the resource persons and your peers during these few days. With these remarks, I declare this workshop officially open. Thank you and God bless you all. 3|Page | bank of zambia | 2,019 | 9 |
Speech by Dr Denny H Kalyalya, Governor of the Bank of Zambia, at the ground-breaking ceremony of the new Barclays Bank Zambia PLC head office, Lusaka, 6 June 2019. | GROUND BREAKING CEREMONY OF THE NEW BARCLAYS BANK ZAMBIA PLC HEAD OFFICE SPEECH BY DR. DENNY H. KALYALYA GOVERNOR – BANK OF ZAMBIA THURSDAY, JUNE 6, 2019 LUSAKA, ZAMBIA GROUND BREAKING CEREMONY OF THE NEW BARCLAYS BANK ZAMBIA PLC HEAD OFFICE FUNDED BY THE ABSA GROUP LIMITED, SPEECH BY DR. DENNY H. KALYALYA, GOVERNOR – BANK OF ZAMBIA – 6 JUNE 2019 The Absa Group CEO, Mr Rene van Wyk; The Director, Bank Supervision Department, BoZ, Ms. Gladys Mposha; The Director, Economics Department, BoZ, Dr. Francis Chipimo; The Deputy Group CEO and CEO Absa Regional Operations, Mr Peter Matlare; Deputy CEO, Absa Regional Operations & Chief Operating Officer Absa CIB, Mr Temi Ofong; The Barclays Bank Zambia Board Chairperson, Ms Chishala Kateka; The Barclays Bank Zambia Managing Director, Mrs Mizinga Melu; Executives from Absa Group; Representatives from Sunshare; Staff from BoZ; Management and Staff of Barclays Bank Zambia Plc; Distinguished Invited Guests; and Members of the press. It is my great pleasure to officiate at this ground-breaking event of Barclays Bank Zambia Plc New Head office. Distinguished Guests, the construction of the new Head office for Barclays Bank Zambia Plc, which will be rebranded as Absa Bank Zambia from next year, is a demonstration of the efforts and commitment by Absa Group Limited to become a Pan-African organisation, that is interested in the sustainable development of the financial sector and the economies of the countries they operate in. Ladies and Gentlemen, this event, also marks a new chapter for one of Zambia ’s oldest banks. Barclays Bank Zambia has been in the country for over a century having opened its first branch in June 1918. Today, the bank has a widespread presence across the country with 41 branches, 103 ATMs, and other digital service delivery channels. It employs in excess of 800 staff. Distinguished Guests, Barclays Bank Zambia is one of the biggest banks in the Zambian banking industry and plays a significant role in the market through the various products and services as just indicated. It is our expectation that Absa Group Limited, the parent company of Barclays Bank Zambia Plc, will continue to build on the foundation and heritage that has been established over the last century. The bank is expected to remain a committed partner in driving financial sector development and supporting the country’s economic development. Distinguished Guests, with the risks to economic growth projected to remain elevated, allow me, to take this opportunity, to urge Barclays Bank Zambia and Absa Group Limited to explore ways in which the bank can assist in addressing some of the challenges facing the country, such as, load shedding, as this has potential to further negatively impact the country’s economic growth. It is our expectation that Barclays Bank Zambia will come up with products and services that will contribute to the enhancement of alternative energy sources to mitigate the threat on economic growth and indeed financial stability arising from load shedding. Ladies and Gentlemen, it is also our expectation that the bank will continue to support the SME sector in Zambia, as the SME sector is key to sustainable economic growth and development of the country. You will agree with me that SMEs have the potential to create many productive jobs and contribute significantly to our economy, if well supported. It is our expectation that Absa Group Limited, through Barclays Zambia, will continue with its efforts and strategies that promote financial system stability, support monetary policy, enhance financial inclusion and gender mainstreaming for sustainable development in line with the Bank of Zambia’s strategic objectives. Today, as we commission this site, it is my hope that the facility will be of highest standards and that the new premises will provide an environment for the provision of innovative financial solutions to the public as an endorsement of the Absa Group brand promise “Bringing Possibilities to Life.” Master of Ceremonies, distinguished guests, ladies and gentlemen, with these remarks, please join me in applauding the Board, management, and staff of Barclays Bank Zambia, and Absa Group Limited, for this initiative that will introduce convenience and world class banking services and facilities to its clientele. The timing of this project is also a good indication that the Absa Group is opportunity focused rather than challenges. We hope this will rub on to the other players in our economy as well. Thank you and God bless. | bank of zambia | 2,019 | 9 |
Speech by Dr Tukiya Kankasa-Mabula, Deputy Governor (Administration) of the Bank of Zambia, at the Stakeholders' Workshop, Lusaka, 2 May 2019. | Tukiya Kankasa-Mabula: Dissemination of results of baseline survey – framework for collection of sex-disaggregated data Speech by Dr Tukiya Kankasa-Mabula, Deputy Governor (Administration) of the Bank of Zambia, at the Stakeholders’ Workshop, Lusaka, 2 May 2019. * * * Salutations: The Chief Executive Officers of Commercial Banks and Non-Bank Financial Institutions The Chief Executive Officer – Rural Finance Expansion Programme (RUFEP) The Chief Executive Officer – Financial Sector Deepening Zambia The Chief Executive Officer – United Nations Capital Development Fund (UNCDF) The Representative -The World Bank Country Office The Representative – United Nations Development Programme (UNDP) The Representative – African Development Bank (AfDB) The Representative – Bankers Association of Zambia The Representatives of various Government Ministries The Representative – Zambia Institute of Banking and Financial Services The Representative – Pensions and Insurance Authority (PIA) The Representative – Securities and Exchange Commission (SEC Captains of Industry; Distinguished Invited Guests; Members of the Press; and Ladies and Gentlemen. Let me begin by welcoming you all to this workshop on the dissemination of the results of the Baseline Survey on the Supply – Side Sex Disaggregated data conducted in the last quarter of 2018. At the same time, I wish to thank the Alliance for Financial Inclusion, Rural Finance Expansion Programme and the Financial Sector Deepening Zambia for supporting the development and implementation of a framework for collection of supply-side sex-disaggregated data from regulated financial service providers. Let me also thank Ms Linda Zuze (the International Consultant on the project) and Mr Shebo Nalishebo (the Local Consultant) and IPSOS Zambia for successfully conducting the Survey. 1/3 BIS central bankers' speeches The Bank of Zambia and its collaborating institutions mentioned earlier are greatly indebted to the respondents who participated in the Survey for completing the questionnaires. We thank you most sincerely for your cooperation. In particular, we are aware that the survey got into the way of your work as you completed the questionnaires. We are pleased to note that the response rate was 90%. This points to the fact that you share in our resolve to bridge the financial inclusion gender gap and engender economic development. Ladies and Gentlemen, having launched the commencement of the project for the development and implementation of a framework for collection of supply-side sex-disaggregated data almost a year ago, I am pleased that today we can mark a significant milestone towards achieving the objective of the project as we disseminate the results of the baseline survey. The survey results not only give us the situation analysis regarding the availability of supply-side sexdisaggregated data, but also provides a synopsis of the magnitude of the financial inclusion gender gap, which we must all work hard to bridge. Ladies and Gentlemen, the main purpose of collecting sex-disaggregated data is to determine the levels of access, usage and quality of financial services; identify barriers to women financial inclusion; and assist with modifying the existing policies, strategies and regulatory measures that have been earmarked for increasing women’s financial inclusion in the medium to long term in Zambia. Collection of sex disaggregated data and the use of this data provides an opportunity for countries to develop policies that specifically target women’s financial inclusion and at the same time provides data and information for financial service providers to build the business case for developing products and services for women. Data will help us to know where we are, where we need to be and which areas to focus on. Thus the main objective of the project we embarked on last year is to establish a framework for collection of reliable, quality and comparable sex-disaggregated data that can facilitate the measurement of progress made toward closing the gender gap. Distinguished guests, let me highlight the key findings from the Survey, which will be the subject of detailed discussion in the course of this morning. The survey revealed among others that; 1. While the financial sector was among the sectors that employ a high percentage of women, they make up 45% of those employed in the sector, presenting a five percentage gender gap. This gap is especially pronounced in the upper echelons of decision-making structures where women make up 28% of board membership and a third of senior management with limited participation beyond marketing positions; 2. The number of borrowers was dominated by men. The number of men with loan accounts in every 1,000 adults was 27 at the end of 2014 compared to 12 for women; 3. When it comes to paying back of loans, women had better repayment behaviour than men. The percentage of non-performing loans for women averaged 4.3% compared to 4.9% for men. Further, women-owned small business accounts exhibited the lowest percentage of nonperforming loans, which ranged between 1-3% during this period. This is, on average, 17 percentage-points lower than that of men. This showed that women and women-owned businesses are more prudent borrowers than men and men-owned businesses; 4. Few financial institutions, offered gender- focused products and services. These products and services were mostly tailored for individual women and women smallholder businesses; 5. Most financial institutions’ Information Management Systems are unable to provide sex2/3 BIS central bankers' speeches disaggregated data. Of the 64 institutions surveyed, only 25 institutions (mostly banks and microfinance institutions) had information management systems that can generate reports based on the sex of account holders, such as the number of women-owned and male-owned accounts, and the number of male and female borrowers; and 6. The number of digital wallets, or e-wallets, has been on the increase. It rose steadily in both number and value. For the sample taken, the number of e-wallets rose to 1.3 million active accounts in 2018 from 86,066 in 2014 while the value increased ten-fold in the last five years, to K405.6 million in 2018 from K42.7 million in 2014. It is gratifying here to note that the gap between men and women has been reducing – from 89% male dominance in 2014 to 80% in 2018. Ladies and gentlemen, we can conclude from the above findings that the large gender gap in account ownership between men and women suggest that women inherently face more challenges in accessing formal financial products and services. Further, most financial institutions, especially non-banks have limited or do not have genderfocused product differentiation. This limited differentiation by gender is a missed opportunity for financial institutions considering that women are better savers and are less likely to default on their loans, and therefore good for the financial institutions’ bottom-line. Distinguished guests, financial institutions therefore need to place greater emphasis on segment performance to support individual women and women entrepreneurs who should be assessed as a profitable business proposition, not as part of corporate social responsibility. The market segmentation should go further to also devise age-specific products and services within the sex-differentiated products and services. We must however, take cognizant of the rapid rise in the use of mobile money as holding great potential to accelerate financial inclusion for women and help reduce the gender gap. Financial service providers must therefore, innovate gender-focused digital financial products and services that will bridge the gap. Ladies and gentlemen, these findings must be an important ingredient in the design and implementation of the framework for collecting and analyzing sex –disaggregated data. As I conclude, I wish to thank you all for attending this workshop and hope that you will use this opportunity to delve into the survey findings, the reasons behind the findings, and recommend appropriate response measures that will shape the framework to facilitate information based policies for bridging the financial inclusion gender gap. It is now my honor and privilege to officially open the workshop and I wish you fruitful deliberations. I thank you and God bless! 3/3 BIS central bankers' speeches | bank of zambia | 2,019 | 10 |
Keynote speech by Dr Denny H Kalyalya, Governor of the Bank of Zambia, at the launch of the 2019 World Savings Day, Lusaka, 31 October 2019. | BANK of ZAMBIA KEYNOTE SPEECH LAUNCH OF THE 2019 WORLD SAVINGS DAY BY DR DENNY H. KALYALYA, GOVERNOR, BANK OF ZAMBIA InterContinental Hotel, Lusaka 31st October 2019, Lusaka, Zambia KEYNOTE SPEECH BY DR DENNY KALYALYA, GOVERNOR, BANK OF ZAMBIA AT THE 2019 WORLD SAVINGS DAY EVENT ON 31ST OCTOBER 2019 AT THE INTERCONTINENTAL HOTEL, LUSAKA The Chief Executive - Securities and Exchange Commission The Registrar and CEO – Pensions and Insurance Authority The Chairperson – Bankers Association of Zambia Senior Government Officials here present Members of the Diplomatic Corps Chief Executive Officers and Senior Private Sector Representatives Representatives from education institutions Members of the Media here present Pupils and students here present, and May I just say, Distinguished Ladies and Gentlemen I am delighted to officiate at this official launch of the 2019 World Savings Day under the theme: ‘Be Money Smart: Savings Give Life a Lift!’. As you may be aware, the World Savings Day is a global event celebrated to promote awareness on the importance of savings. In line with the National Strategy on Financial Education of 2012, Zambia has observed the World Savings Day since 2014. Distinguished Ladies and Gentlemen, this year’s World Savings Day commemoration presents yet another opportunity for consumers to learn about financial products as well as how to select and assess appropriate financial products to maximise their usage for key life events. Following the launch of the National Financial Inclusion Strategy in 2017, new informal financial service providers have emerged, such as, village banks and savings groups in both the rural and urban areas. As both formal and informal financial service providers are agents of financial inclusion it is important for us, the regulators, to seek effective ways of linking the two types of players with a view to reducing informality as we expand financial inclusion. Distinguished Guests, in recognition of the importance of formal financial inclusion in supporting economic growth, the Bank of Zambia is collaborating with SaveNet, to KEYNOTE SPEECH BY DR DENNY KALYALYA, GOVERNOR, BANK OF ZAMBIA AT THE 2019 WORLD SAVINGS DAY EVENT ON 31ST OCTOBER 2019 AT THE INTERCONTINENTAL HOTEL, LUSAKA develop channels to link informal savings groups to formal financial services providers. According to SaveNet data, at the end of 2018 there were 15,700 savings groups in Zambia, with cumulative savings amounting to K53.1 million. This points to a good opportunity for the formal financial service providers to mobilise deposits. In this regard, it has been observed that a number of regulated financial service providers and mobile money operators have already started designing products aimed at tapping into this market. It is hoped that this move will expedite the transition of informal groupings into the formal financial sector and enable more people gain access to a wider range of quality and affordable financial services. I want to stress here, as one of our colleagues noted last year’s commemoration that financial service providers have to provide the products and services that the people want and not what providers think they want. Distinguished Guests, recognising that financial exclusion is more prevalent in rural areas, the Bank of Zambia has adopted various initiatives to improve rural financial inclusion in line with the national Rural Finance Policy and Strategy of 2012. These initiatives include: 1. leveraging digital financial services for general financial transactions; and 2. facilitating expansion of general services access points network of health, education, and agricultural organisations into financial access points through partnership and Government support. In line with this year’s World Savings Day theme: ‘Be Money Smart: Savings Give Life a Lift!’, I urge members of the public to select and demand appropriate formal financial products for their key life events, such as, births, education and health, and to be aware of the obligations and responsibilities associated with the products. I encourage financial service providers to take time to explain clearly and simply the terms and conditions of financial products so that consumers can understand their rights and obligations. KEYNOTE SPEECH BY DR DENNY KALYALYA, GOVERNOR, BANK OF ZAMBIA AT THE 2019 WORLD SAVINGS DAY EVENT ON 31ST OCTOBER 2019 AT THE INTERCONTINENTAL HOTEL, LUSAKA Distinguished Ladies and Gentlemen, may I take this opportunity to congratulate all the individuals and institutions that will receive Financial Literacy Awards for making a difference in the Financial Literacy Campaigns nation-wide. Distinguished Ladies and Gentlemen, let me end by acknowledging all the institutions and individuals that have joined in the commemoration of this year’s World Savings Day. In particular, I wish to thank the Pensions and Insurance Authority; Securities and Exchange Commission; Bankers Association of Zambia; the Ministry of Finance; Rural Finance Expansion Programme; the German Savings Banks Foundation for International Cooperation; Financial Sector Deepening Zambia; NGOs and all the public as well as private sector organisations that have continued to support the stepped up national financial literacy campaigns since 2012. I THANK YOU AND GOD BLESS US ALL! | bank of zambia | 2,019 | 11 |
Speech by Mrs Rekha Chifuwe Mhango, Deputy Governor (Administration) of the Bank of Zambia, at the virtual dissemination workshop of the 2021 findings of the private sector foreign investment and investor perception survey, Lusaka, 15 December 2021. | Rekha Chifuwe Mhango: 2021 findings of the private sector foreign investment and investor perception survey Speech by Mrs Rekha Chifuwe Mhango, Deputy Governor (Administration) of the Bank of Zambia, at the virtual dissemination workshop of the 2021 findings of the private sector foreign investment and investor perception survey, Lusaka, 15 December 2021. * * * It is my great pleasure to welcome you all to this virtual dissemination workshop of the results of the private sector foreign investment and investor perception survey undertaken in 2021. The ongoing global health crisis has demonstrated the crucial contribution of technology and innovation to addressing challenges brought about by covid-19. In this regard, this workshop is being held virtually to allow participants follow deliberations from the safety of their own space. We are grateful to you all for finding time to join this virtual meeting. In light of the covid-19 pandemic, we considered alternative ways of using remote methods to undertake the survey and I am pleased to inform you that the 2021 survey was conducted virtually. The Bank of Zambia, Zambia Development Agency, Zambia Statistics Agency and other collaborating institutions are greatly indebted to the respondents who participated in the survey. We truly appreciate your dedication and support. Let me take this opportunity to thank the balance of payments technical committee comprising the Zambia Statistics Agency, Zambia Development Agency, Bank of Zambia, and other collaborating institutions for successfully conducting the 2021 survey. Ladies and gentlemen, this year’s survey response rate was 54.0 percent, a slight reduction from the 56.0 percent recorded in the 2020 survey. We were cognisant of the restricted working arrangements induced by covid-19 and extended the survey period to accommodate a larger number of enterprises who took time to respond. I must mention that the data we collect from various enterprises in this exercise is extremely important as it generates information that enables us understand developments in the external sector, which have implications for the formulation of sound monetary, fiscal, trade, and investment policies. This is in addition to taking necessary measures to improve the ease of doing business in Zambia. The 2021 survey summarises the magnitude, type, sources, and direction of the private sector foreign capital for the year 2020 and the first half of 2021, as well as investor perceptions on the investment climate in Zambia. Let me now turn to the highlights of the survey findings, which is the subject of our discussion today. Distinguished ladies and gentlemen, in 2020, the stock of private sector foreign liabilities declined by about 5.0 percent to US$21 billion. This was due to the fall in the stock of foreign direct investment (FDI) owing to valuation effects on equity mostly held by the mining and quarrying sector. Nonetheless, FDI continued to account for the largest share of the stock of private sector foreign liabilities. Private sector external debt, which accounted for about 80 percent of foreign liabilities, increased by 5 percent to US$17 billion due to revaluation changes in non-us dollar denominated loans predominantly in the electricity, manufacturing, information and communication as well as real estate sectors. Esteemed invited guests, in terms of flows, overall net foreign liability outflows of US$74 million 1/3 BIS central bankers' speeches were recorded in 2020 against net inflows of US$357 million in 2019. This was due to loan repayments to non-affiliates by the mining, manufacturing, electricity as well as wholesale and retail trade sectors, and the reduction in currency holdings by non-residents in domestic deposittaking corporations. However, FDI liability inflows amounted to US$200 million compared to US$860 million in 2019. Reduced re-invested earnings and debt repayments, largely by the mining and quarrying sector, accounted for the decline in FDI inflows. Canada continued to be the major source of private sector foreign liabilities. Ladies and gentlemen, the stock of private sector foreign liabilities declined further in the first half of 2021 to US$20 billion due to loan repayments mostly by the mining and quarrying sector as well as revaluation effects on equity. However, a net inflow of about US$600 million was recorded against net outflows of US$295 million a year ago. This was due to the upswing in FDI inflows on account of higher reinvested earnings by the mining, deposit-taking corporation, manufacturing, electricity, as well as information and communication sectors. Distinguished ladies and gentlemen, another major finding from the survey is that the stock of private sector foreign assets rose by 16 percent to US$3.0 billion in 2020 mainly due to the increase in currency and deposits by the mining and deposit-taking corporations. The surge in the holdings of currency and deposits contributed significantly to the increase in foreign asset flows by 60 percent to US$700 million. However, FDI asset acquisitions slumped to US$63 million in 2020 from US$624 million in 2019 owing to the reduction in the mining sector’s debt flows to fellow enterprises. The United Kingdom was the major recipient of foreign asset flows and most of the private sector assets are domiciled there. Ladies and gentlemen, with regard to investor perceptions, political stability, ease of doing business, availability of resources, and market potential continued to feature as the main factors that influenced re-investment in Zambia. Despite the unprecedented effects of the covid-19 pandemic in constraining the business investment, the promotion of the use of digital financial services and the reduction in the monetary policy rate were seen as positive measures that supported business activity. However, the temporary closure of some commercial bank branches and the revision of banking operating hours due to the Covid-19 pandemic were perceived as having had a negative impact on investment. Esteemed invited guests, as I conclude, let me share with you some key measures recommended by the majority of the respondents to enhance investment. These include improvements in service delivery by the public sector, having a stable and sustainable tax system, maintaining stability in the exchange rate, preserving political stability, consistency in government policy, and continued investment in infrastructure development. Other areas highlighted include addressing high lending rates, increased efforts in the fight against corruption and reducing bureaucratic processes. Further, respondents were of the view that government needs to take appropriate measures to enhance private sector involvement in decision-making and streamlining licensing requirements. In closing, I wish to thank you all for attending this virtual meeting and hope that you will use the occasion to explore the survey findings and recommend appropriate measures to contribute to the enhancement of the business environment. It is now my singular honour and privilege to officially open the workshop and wish you all fruitful deliberations. I thank you for your kind attention. God bless you. 2/3 BIS central bankers' speeches 3/3 BIS central bankers' speeches | bank of zambia | 2,022 | 1 |
Speech by Dr Denny H Kalyalya, Governor of the Bank of Zambia, at the World Savings Day and Financial Literacy Awards, 4 November 2022. | Denny H Kalyalya: Sustainable finance - savings are globally diverse, we are united in responsibility Speech by Dr Denny H Kalyalya, Governor of the Bank of Zambia, at the World Savings Day and Financial Literacy Awards, 4 November 2022. *** SALUTATIONS Mr. Phillip Chitalu, Secretary and Chief Executive Officer, Securities and Exchange Commission Mrs. Namakau Ntini, Acting Registrar, Pensions and Insurance Authority Mr. Markus Wittkamp All Senior Government officials Mrs Mizinga Melu – Chairperson Financial Literacy Working Group and BAZ All Chief Executive Officers of Financial Services Providers All Cooperating partners Nominated Participants for the Financial Literacy Awards Invited Guests Ladies and Gentlemen Good afternoon, It is an honor for me as Champion of financial education, to engage with you during the public awareness campaign for the 2022 World Savings Day and the Financial Literacy Awards ceremony. This year's theme focuses on preparing for the future, continuing with the 2021 theme "Sustainable Finance: Savings are globally diverse, we are united in responsibility." Sustainable finance involves taking due account of environmental, social and governance considerations when making investment decisions. This is pertinent considering the threat environmental risks are increasingly presenting to the economy. It is therefore expected that efforts to promote sustainable finance will contribute to the attainment of a climate resilient economy. The recently launched 8th National Development Plan also supports a low carbon and climate- resilient development pathway towards attainment of Vision 2030 and the Sustainable Development Goals. Ladies and Gentlemen As has been done for many years now, Zambia joins the international community in commemorating the World Savings Day which is celebrated every year on 31 October to emphasize the significance of savings for individuals. It is important to note that there are various forms of savings which include among others Government securities, listed securities and equities, pension and insurance funds, savings accounts and other investment products. It is important that Zambian citizens are aware of the different types of products and services that are available to help them save, in a sustainable 1/4 BIS - Central bankers' speeches manner. These campaigns are therefore aimed at creating awareness to enhance skills, attitudes and behaviours on personal financial management amongst children, youth and adults. All citizens should be aware of the effect their decisions have on the environment. This is critical if they are to have the confidence and motivation to make sound financial decisions, use appropriate financial services to improve their financial well-being and contribute to sustainable national development as adults in the future. Distinguished Guests Sustainable Finance can only be effectively entrenched when individual financial decisions are aligned to sustainable practices. Individual behaviours are shaped early in life, therefore the focus on financial education being incorporated in our education system is quite critical. As part of the implementation of the National Strategy on Financial Education, we are assured that through the primary and secondary school curricula, children and youths are learning concepts of personal, household and business financial management in subjects such as social studies, expressive arts, physical education, business studies and civic education. Recently, a significant milestone was achieved when supplementary financial education materials for learners and teachers in the lower and upper secondary schools were published with the support of Financial Sector Deepening Zambia. We also commend the Curriculum Development Centre for their contribution in the publication of these materials. Going forward, we will need to embed the principles of sustainable finance in supplementary materials to ensure that our next generation of adults are able to consider social and environmental risks in their investment choices. Ladies and Gentlemen As the Government is developing the 2023-2027 National Financial Inclusion Strategy, it is the right time to integrate elements of sustainability, with consideration of environmental risks and climate change mitigation measures into the Strategy. Sustainability improves the quality of our lives, protects our ecosystem and preserves natural resources for future generations.. In this regard, the Bank has a vested interest in encouraging financial sector players to be innovative, and responsive to climate change effects by designing financial services that support a sustainable economic growth journey, while balancing financial stability, inclusion, integrity and consumer protection in the financial ecosystem. Ladies and Gentlemen It is a continuing concern of all key stakeholders that provision of financial services in rural areas continues to be significantly lower than in urban areas. This has constrained the rural populace from access to savings products. This largely on account of poor infrastructure coupled with low literacy levels. As of June 2020, 39 out of the 116 districts in the country, did not have either bank branches or agents. It is from this backdrop that the Bank of Zambia, the Ministry of Finance and National Planning and the Ministry of Health, commenced an initiative to help accelerate rural financial inclusion in Districts by promoting the use of health facilities as general access 2/4 BIS - Central bankers' speeches points for financial services. The General Access Point Inspection Report was presented during the dissemination workshop on 13 September 2022 and is available for detailed information. Ladies and Gentlemen The implementation of the National Strategy on Financial Education requires the united responsibility of the financial sector. This has been demonstrated by the Pensions and Insurance Authority, the Insurers Association of Zambia as well as Securities and Exchange Commission and the Capital Markets Association of Zambia who successfully launched the Insurance Week under the theme "Insurance-Solutions for a better tomorrow" and World Investor Week under the theme "Learn more about Investor resilience and sustainable finance" earlier this month. I am confident that the key messages disseminated during these events will contribute to raising the levels of financial literacy in the country. Be assured that I am committed to supporting the implementation of the National Strategy on Financial Education through such campaigns. Ladies and Gentlemen The World Savings Day celebrations would not be successful without recognising individual and organizational contributions towards improving financial literacy in Zambia. In this regard, awards will be presented under nine categories namely: 1. Exceptional individual contribution to financial education, 2. Outstanding theme interpretation; 3. Exceptional leadership in financial literacy; 4. Champions award; 5. Most innovative financial education programme; 6. Outstanding financial literacy footprint; 7. Exceptional financial literacy media outreach; 8. Outstanding initiative by an educator; and 9. Best savings product of the year. I am delighted to grace this year's World Savings Day award presentation and wish the nominated participants all the best. In conclusion, I would like to thank the organisers and stakeholders under our partnership arrangement, in particular, the Bankers Association of Zambia, Securities and Exchange Commission, Pensions and Insurance Authority, Rural Finance Expansion Programme and DSIK for their continued support to the World Savings Day celebrations every year. THANK YOU 3/4 BIS - Central bankers' speeches 4/4 BIS - Central bankers' speeches | bank of zambia | 2,023 | 1 |
Speech (virtual) by Dr Denny H Kalyalya, Governor of the Bank of Zambia, at the Launch of the 2022 Financial Literacy Week, 21 March 2022. | Denny H Kalyalya: Build your future - be money smart Speech (virtual) by Dr Denny H Kalyalya, Governor of the Bank of Zambia, at the Launch of the 2022 Financial Literacy Week, 21 March 2022. *** SALUTATIONS All Senior Governmental officials Chief Executive Officers of Financial Sector Regulators – PIA and SEC All Chief Executive Officers of Financial Services Providers All Cooperating partners Invited Guests Ladies and Gentlemen Good morning I am delighted to welcome you all to this years' launch of the public awareness campaign for the Financial Literacy Week activities, which will run from 21-27 March 2022. The commemoration of the Financial Literacy Week commenced yesterday with a live nationwide television broadcast by the Honourable Minister of Finance and National Planning, Dr. Situmbeko Musokotwane. The commemoration will continue with a number of activities in all the 10 provinces of our country, including public exhibitions, debates, media programmes, an innovation challenge and visits to financial institutions and selected government agencies. This year's theme "Build your Future: Be Money Smart" is anchored on the importance of planning for one's future through making prudent and well-informed financial decisions now. The theme prompts all Zambian citizens, particularly young people, to own the responsibility of securing their financial future. The Financial Literacy Week activities continue to focus on young people in primary, secondary and tertiary institutions to help future adult generations are appropriately equipped to make sound financial decisions for their financial well-being. Ladies and Gentlemen, Zambia's commemoration of Financial Literacy Week is undertaken under the auspices of the Global Money Week, which is an annual global awareness-raising campaign on the importance of financial education for children and youth. This year's commemoration of Global Money Week and Financial Literacy Week is particularly special in that this year marks the 10th anniversary of the Global and local annual campaigns. In the last 10 years, the campaigns have been targeted at creating awareness amongst children, youth and adults on the need to acquire the knowledge, and skills about personal financial management. With the acquired knowledge, they can have the confidence and motivation to make sound financial decisions and use appropriate financial services. This knowledge is expected to translate to improved financial wellbeing, and resilience of our citizens, and enable them to contribute to national development through improved productivity as well as job and wealth creation. 1/4 BIS - Central bankers' speeches Invited Guests, as we look back on the last 10 years of the commemoration of Financial Literacy Week and recognize its contribution to financial education, allow me to mention a few milestones that have been achieved: In 2012, Zambia launched its first ever National Strategy on Financial Education (phase I) which clearly identified children, youths, adults, Small Medium Enterprises and Small holder farmers as target groups. The main goal was to have a financially educated Zambian population by 2030; In 2017, the National Financial Inclusion Strategy was launched. The main goal of the Strategy was to achieve universal access to and usage of a broad range of quality and affordable financial services that meet the needs of individuals and enterprises and targets overall financial inclusion of 80% of the adult population by 2022; In 2017, under the National Strategy on Financial Education (phase I) financial education was integrated into both primary and secondary school curriculum; In 2019, phase II of the National Strategy on Financial Education was launched, to address the gaps identified under phase I; and Through the financial literacy campaigns, the number of financial services accounts designed for children increased to more than 20 compared to only 3 at the beginning of 2013. We strongly believe that the formulation and implementation of these national Strategies have provided a robust framework that facilitates effective stakeholder engagement between the Government, financial sector regulators, financial service providers and the general public. This collaboration has resulted in increased public awareness of the availability of financial products and services across the country, therefore contributing to the increase in overall financial inclusion in Zambia from 37.3% in 2009 to 69.4% in 2020. As financial sector regulators and services providers, we are obliged to disseminate information about the different types of services and products that are available to the public as well as some of the risks that maybe associated with them. This information helps individuals and businesses to increase their awareness on the number of ways to save and invest their financial resources, as well as how to manage their financial affairs safely in an increasingly digitized environment. Ladies and Gentlemen, technology and innovation in the financial sector has played a major role in raising the level of financial inclusion in the country over the last five years. According to the FinScope 2020 Survey, while overall financial inclusion increased to 69.4 percent, from 59.3 percent in 2015, formal financial inclusion rose significantly to 61.3 percent from 38.2 percent. This was largely due to the uptake of mobile money, which went up exponentially by 58.4 percent from 14.0 percent. Invited Guests, the use of digital financial platforms for the payment of retail and public services, including Government services has significant benefits to consumers and service providers alike. Digital platforms facilitate relatively safe, efficient and 2/4 BIS - Central bankers' speeches convenient service delivery and allows for tracking of financial transactions. With regard to Government related services, the use of digital platforms is expected to enhance revenue collection and contribute positively to the national Treasury. This notwithstanding, the rise in the use of Digital Financial Services has also introduced significant risks for individuals as well as for financial service providers. To address these risks, there is greater need to enhance cyber security and raise awareness about fraud to secure higher uptake and protect the consumers of digital financial services. Ladies and Gentlemen, it is a well known fact that the Covid 19 pandemic has affected millions of people worldwide in the last three years, and Zambia is no exception. While the significant adverse impacts of the pandemic on global economic growth are subsiding, the pandemic is still a risk for future economic growth and consequently financial inclusion. I therefore encourage everyone to get vaccinated and continue adhering to health guidelines as prescribed by the authorities in order to protect ourselves and our communities. Ladies and Gentlemen, the contribution of the financial sector towards the attainment of Vision 2030 and its underlying principles is being undertaken through the implementation of the National Financial Sector Development Policy, the National Financial Inclusion Strategy, the Rural Finance Policy and Strategy, the Capital Markets Development Plan and the National Strategy on Financial Education. These financial sector strategies aim to broaden and deepen the types of financial services in the banking, capital markets, microfinance, insurance and pensions sectors as well as to promote financial inclusion. As financial sector regulators, we have vested interest in ensuring that the financial sector is innovative, responsive to demand for financial services and that it supports Zambia's economic growth, while maintaining stability. It is essential therefore, that the financial sector continues to expand its portfolio of products and services by leveraging reforms, digital innovations and targeted outreach. In this regard, I wish to urge all stakeholders in the financial ecosystem to collaborate and contribute to the financial inclusion agenda through the development of appropriate infrastructure, provision of affordable customer centric products, delivery of financial literacy and promotion of consumer protection for the underserved population, particularly in rural areas. Invited Guests, it is important to note that as part of the implementation of the National Strategy for Financial Education, the Financial Literacy Awards are held in October every year to recognize efforts made by individuals and institutions to reach out to the public through financial literacy awareness initiatives. I therefore encourage you to submit your financial literacy activities and initiatives to the Financial Literacy Working group for consideration for this year's awards. In conclusion, I would like to thank the Working Group under the National Strategy on Financial Education Phase II for the organization of the Financial Literacy Week. In particular, the Ministry of Finance and National Planning Financial Education Team, financial sector regulators, (Pensions and Insurance Authority and the Securities and 3/4 BIS - Central bankers' speeches Exchange Commission), the Bankers Association of Zambia, our collaborating partners DSIK (the German Sparkassenstiftung) Zambia, Financial Sector Deepening Zambia and all other stakeholders who have continued to support the Financial Literacy Week commemorations every year. The Bank of Zambia remains committed to supporting this national event and we encourage all financial institutions and stakeholders to participate in the FLW activities across the country. MAY GOD BLESS US ALL. 4/4 BIS - Central bankers' speeches | bank of zambia | 2,023 | 1 |
Keynote address by Dr Denny H Kalyalya, Governor of the Bank of Zambia, at the conference and meeting of the Community of African Banking Supervisors (CABS), Lusaka, 29 April 2024. | Denny H Kalyalya: Keynote address - conference and meeting of the Community of African Banking Supervisors (CABS) Keynote address by Dr Denny H Kalyalya, Governor of the Bank of Zambia, at the conference and meeting of the Community of African Banking Supervisors (CABS), Lusaka, 29 April 2024. *** The Executive Secretary of the Association of African Central Banks AACB), Dr Djoulassi Kokou Oloufade, Mr. Vasily Pozdyshev, Senior Advisor, Financial Stability Institute of the Bank for International Settlements, Representatives of the Association of African Central Banks, Representatives and resource persons from the International Monetary Fund, the World Bank, Bank of England, Bank for International Settlements, African Development Bank, Making Finance Work for Africa, the Currency Exchange Fund (TCX), Distinguished Speakers and Delegates, Ladies and Gentlemen, Good morning. It is an honour and privilege to officiate at the 2024 Conference and Meeting of the Community of African Banking Supervisors (CABS). Let me start by welcoming you to Lusaka, Zambia and to the Mulungushi International Conference Center. The Mulungushi International Conference Centre, where we are holding these meetings today, has some historical significance not only to Zambia but to the concept of Pan Africanism. It was at this conference centre that the Summit of the Organisation of African Unity (OAU) formulated the mandate that translated the transformation of the OAU into the African Union (AU) in July 2001. Aside from rekindling the genesis of the AU, this conference centre also hosted a few historical events including the third Summit of the Non-Aligned Nations in 1970. This is the organisation that spearheaded the independence of most the countries in the Southern Africa. And from the entertainment world, in the 70s, the centre hosted the late famous ambassador of soul music, James Brown, perhaps most of you were young then or not yet born and could not remember the legendary musician, James Brown. Back to the Agenda, I wish to note that the CABS conference and meeting are being held at a very challenging time. Barely recovering from the impact of the COVID-19 1/4 BIS - Central bankers' speeches pandemic, the global economy is faced with a myriad of challenging vulnerabilities and risks that have potential to destabilize the African region. You will agree with me that Africa is a living example of occurrences of climate change events and nature-related exposures. Just last year, in 2023, the Southern region grappled with extreme floods which were evident in Malawi and Mozambique due to the cyclone Freddie, a similar event happened in North Africa, in Morocco, Libya and surrounding areas. In 2024, the Southern African region is in the middle of a worst drought in years, with elevated temperatures. The extreme weather events have a devastating impact on our region, affecting especially agricultural productivity (which threatens food security and livelihoods); infrastructure, and electricity generation for those countries that are dependent on hydro. The other matter of concern is the on-going geopolitical conflicts in the Middle East including the on-going Russia-Ukraine war which pose threats to the stability of commodity markets. Ladies and Gentlemen. These events are real and have devastating impact on our economies. Persistent high inflation and low growth occasioned by these events filters through the financial system, and call for effective regulations, and supervision at both micro and macro level to preserve stability. It is, therefore, gratifying that the conference has incorporated these issues on the agenda. Discussions on how to resolve these issues should begin now so that we start developing concreate solutions. Ladies and Gentlemen, as you deliberate over the next two days, and plan for AACB conference later this year, I wish to implore you to be candid for us to develop solutions to the challenges that bestow our continent. The specific topic of interest which I note included in the agenda, is the financial stability risks related to sovereign-bank nexus. This has become evident and a subject of concern especially among Emerging and Developing countries. While the rise in the sovereign-bank nexus began earlier in the decade, it surged during the COVID-19 pandemic as economic activity declined and governments increased fiscal support to non-financial firms and households to cushion the impact of the crisis. To lower the potency of the sovereign-bank nexus, there have been debates on the policy considerations. This includes, among others, suggestions to maintain larger capital buffers and better prudential frameworks to strengthen banks and reduce both the probability and severity of stress. Prudential policies like adjustments to risk weights and exposure limits that restrict excessive sovereign debt holdings by banks have also been noted to limit the exposure. However, all these views require consensus. Chairperson, ladies, and gentlemen 2/4 BIS - Central bankers' speeches It is good to note that you have dedicated some time to these discussions, and I note that we have colleagues from the IMF and World Bank Group leading the discussions. Ladies and gentlemen, considerations of bank resolution and crisis management and a review of key lessons drawn from the banking turmoil in the United States and Europe of March 2023 are also matters that deserve discussion. This is relevant to all of us as supervisors, as the question is not whether there will be bank crisis in our respective jurisdictions, but when there is a bank crisis, are we ready and do we have the right tools to deal with the crisis that may ensue, especially in this digital age. Just this month, here in Zambia, the Bank of Zambia as the regulatory and resolution authority took possession of one the local banks due to insolvency. It is a test rehearsal of the inaugural crisis simulation exercise that we conducted in May 2023. And there are a number of lessons to be learnt especially as it relates to coordination of regulators and the fiscal authorities. It has also demonstrated that the need to have the right playbook to contain the risks that may arise from a failed institution is critical. Ladies and gentlemen, I have also taken note of the second day's agenda which will review and plan the work activities under the three CABS Working Groups namely: Cross-Border Banking Supervision; Crisis Management and Banking Resolution; and Basel Regulations. This work is critical as it forms part of the preparatory work for the 46th Annual Meetings of the Association of African Central Banks (AACB) scheduled for July 28 – August 2, 2024, in Tripoli, Libya. Ladies and gentlemen, I believe that the work being done under CABS is laying the foundation for something greater. The continent needs to move towards attainment of having consistent prudential regulations and supervisory frameworks. I am cognizant of the various work that we are doing under different regional blocks that support harmonization of regulatory and supervisory frameworks, but we need to start moving towards harmonization across the continent. If we do not achieve harmonization, this will mean that regional and Pan-African banking groups that operate across nations have to deal with divergent regulatory and supervision regimes such as Basel standards, Anti-Money Laundering and Know Your Customer rules. Ladies and Gentlemen, in conclusion, it is my hope that CABS will continue working hard in supporting the undertakings of the AACB Governors and keep following up on its resolutions towards effective implementation of the objectives of the continent. The Bank of Zambia is exceedingly privileged to host this event. Some of you may have participated in the annual conference that Zambia hosted in Livingstone last year in August and still have fresh memories. Lusaka is quite cosmopolitan with most of tourist sites which may be of interest, within reachable distances. Livingstone is just about 45 3/4 BIS - Central bankers' speeches minutes flight from Lusaka. There are also a number of shopping facilities and dining areas within walkable distance of the conference center. Please, spare sometime and sample the Zambian hospitality. I thank you for your kind attention and wish you fruitful engagements. 4/4 BIS - Central bankers' speeches | bank of zambia | 2,024 | 5 |
Speech by Dr Denny H Kalyalya, Governor of the Bank of Zambia, at the Launch of the 2024 Financial Literacy Week, Lusaka, 18 March 2024. | Denny H Kalyalya: Protect your money, secure your future Speech by Dr Denny H Kalyalya, Governor of the Bank of Zambia, at the Launch of the 2024 Financial Literacy Week, Lusaka, 18 March 2024. *** The Minister of Finance and National Planning, Hon Dr Situmbeko Musokotwane, MP, represented by the Permanent Secretary for Economic and Financial Management, Mr. Denies Chisenda The Permanent Secretary for Technical Services, Ministry of Education, Mr. Joel Kamoko All Senior Governmental officials, present The Chief Executive Officer, Securities and Exchange Commission, Mr. Phillip Chitalu The Registrar of Pensions and Insurance Authority, Mrs Namakau Ntini The Chairperson of the Bankers Association of Zambia, Ms Lowani Chibesakunda All Chief Executive Officers of Financial Services Providers All Cooperating partners Boys and Girls Distinguished Invited Guests Members of the Media Ladies and Gentlemen Good morning I am pleased to extend a warm welcome to you all for joining us for this year's launch of the public awareness campaign for the Financial Literacy Week activities, scheduled for 18 to 24 March 2024. The campaign will be marked by a variety of activities, such as, public exhibitions, debates, and media programmes that will be conducted by financial institutions and stakeholder partners in all the ten Provinces of our country. Distinguished Guests, the theme for this year, "Protect Your Money, Secure Your Future," aligns with the official theme for Global Money Week 2024 and has been adopted by Financial Literacy Week in Zambia. This theme emphasises the importance of adopting a responsible and security-conscious approach to managing personal finances, by being mindful of potential risks in the financial sector and safeguarding one's hard-earned money. These risks include financial scams that include fraud, 1/3 BIS - Central bankers' speeches pyramid schemes, cyber-attacks, and identity theft. Limited financial literacy and awareness about safe usage of digital financial services increase the likelihood of individuals falling victim to these risks. With the increased usage of Digital Financial Services, financial scams have also increased. As financial sector regulators and services providers, we are obliged to disseminate information about the risks that may be associated with different types of services and products in order to increase public awareness on how to save, borrow, and invest financial resources safely in an increasingly digitised environment. Therefore, I urge financial service providers and stakeholders to join the 'Go Cashless' campaign, which the BoZ will continue to conduct this year, aimed at scaling up the safe usage of digital financial services in the country. Ladies and Gentlemen, in accordance with this year's theme, we would like to implore consumers of financial services and products to take a keen interest in safeguarding their money by engaging with licensed financial institutions. In recent years, the Bank of Zambia has observed a rise in the number of individuals who have fallen victim to promoters of money circulation schemes, resulting in the loss of their hard earned income and jeopardising their future. This trend is deeply concerning. The general public is therefore urged to be vigilant and report all suspicious financial institutions to law enforcement agencies. At the same time we want warn all fraudsters that the law will catch up with them. Esteemed Guests, we firmly believe that the development and execution of national strategies on financial education and inclusion have established a robust framework that facilitates effective engagement among various stakeholders, including Government, financial sector regulators, financial service providers, and the private sector. This collaborative effort has led to various initiatives to heighten awareness among the public regarding the availability and safe usage of financial products and services nationwide. An important milestone to note is the publication of financial education supplementary books for students in Grades 1 to 12, which have been integrated into the school curriculum and translated into 7 local languages for Grades 1 to 4. These books were developed through a collaborative effort by the Ministry of Finance and National Planning, the Curriculum Development Centre under the Ministry of Education, the Bank of Zambia, and other key stakeholders with the objective of providing our future generations with the essential knowledge about making well-informed financial decisions for their financial well-being. Today, we will witness the official launch of the supplementary books. Distinguished Guests, as we have said before the Finscope 2020 Survey, revealed that there has been an increase in overall financial inclusion in Zambia from 37.3% in 2009 to 69.4% in 2020. However, despite the increase, it has been observed that awareness levels regarding financial products and services remains low in rural areas. According to the findings of the 2022 Micro, Small, and Medium Enterprises Finance Survey, awareness levels regarding financial products and infrastructure tend to be higher among business owners in urban areas compared to those in rural areas. For example, the awareness level for business loans was 69.7 percent in urban areas compared to 59.1 percent in rural areas. Similarly, awareness of property insurance 2/3 BIS - Central bankers' speeches stood at 49.7 percent in urban areas in contrastto 27.8 percent in rural areas. Additionally, awareness of micro-credit was at 40.4 percent in urban areas, while it was at 27.6 percent in rural areas. Given this challenge, I would like to encourage financial service providers to consider, among other measures, employing the agency model for the provision of financial services to people in rural districts that lack physical presence of commercial banks or financial service providers. The Bank of Zambia and the Ministry of Finance and National Planning have embarked on enhancing rural financial inclusion by promoting the use of public institutions, such as, health centres for the provision of financial services. In this regard, the General Access Point Inspection Report provides detailed insights into the location and adequacy of the health centres for setting up office space. This report is readily available for reference on the BoZ website (www.boz.zm). Ladies and Gentlemen, please be reminded that as part of the National Strategy for Financial Education, the Financial Literacy Awards are held annually in October. The objective of these awards is to recognise the efforts made by individuals and institutions to reach out to the public through financial literacy awareness initiatives. In this regard, I urge you to submit your portfolio of financial literacy activities and initiatives to the Financial Literacy Working Group for consideration for this year's awards. As I conclude, please allow me to extend my sincere gratitude to the Working Group under the National Strategy on Financial Education Phase II for organising the Financial Literacy Week. I particularly commend the Ministry of Finance and National Planning Financial Education Team, our other fellow financial sector regulators (the Pensions and Insurance Authority and the Securities and Exchange Commission), the Bankers Association of Zambia, and our collaborating partners DSIK (the German Sparkassenstiftung) Zambia, Financial Sector Deepening Zambia, and all other stakeholders who have consistently supported the Financial Literacy Week commemorations each year. The Bank of Zambia remains steadfast in its commitment to supporting this national event, and we encourage all financial institutions and stakeholders to actively participate and continue conducting financial literacy activities nationwide throughout the year. THANK YOU FOR LISTENING. GOD BLESS! 3/3 BIS - Central bankers' speeches | bank of zambia | 2,024 | 5 |
Speech by Dr Denny H Kalyalya, Governor of the Bank of Zambia, at the Launch of the Monetary Policy Report and Stakeholder Engagement, Lusaka, 26 February 2024. | Denny H Kalyalya: Launch of the Monetary Policy Report Speech by Dr Denny H Kalyalya, Governor of the Bank of Zambia, at the Launch of the Monetary Policy Report and Stakeholder Engagement, Lusaka, 26 February 2024. *** Secretary to the Treasury Senior Government Officials here present Bank of Zambia Board Members Deputy Governors Members of the Monetary Policy Committee Former Bank of Zambia Governors Former Bank of Zambia Deputy Governors Chief Executive Officer of the Securities and Exchange Commission Chief Executive Officers of the Pensions and Insurance Authority Senior Bank of Zambia Management Chief Executive Officers of Financial Institutions here present Representatives of Cooperating Partners here present Captains of Industry Distinguished Invited Guests Members of the Media Ladies and Gentlemen. It is a great honour and privilege for me to be welcoming you all to this Breakfast Meeting where we are launching the first publication of the Monetary Policy Report (MPR) by the Bank of Zambia. This is a monumental occasion in the history of the Bank and our beloved country. Our expectation is that the publication of the MPR will enhance our transparency, accountability, communication, and well-grounded interactions on monetary policy matters. As we commemorate the launching of the MPR it is important to recognise that it is a product of the newly constituted Monetary Policy Committee (MPC). The Committee is established by statute, the new Bank of Zambia Act, 2022. This is another significant milestone, as it is the first time in the history of the Bank and the country that we have a statutory MPC. 1/3 BIS - Central bankers' speeches Distinguished invited guests, the Bank has been preparing these reports to support its monetary policy decisions, but only for internal use. However, under the new Bank of Zambia Act, 2022, it is a requirement that the Bank publishes the MPR. As an operationally autonomous institution the need for transparency and accountability can hardly be overemphasised. This Report is also part of the attributes of the forwardlooking monetary policy framework that we adopted in April 2012 wherein communication of decisions is an important prerequisite. We, at the Bank of Zambia, are, therefore, excited that today we have reached and achieved this significant milestone, notwithstanding the enormous responsibility this places on our shoulders, especially those of the Monetary Policy Committee (MPC) members. Back in April 2012, the Bank adopted the forward-looking monetary policy framework because the monetary aggregate targeting framework it had been using was no longer that effective in achieving the inflation objective, due to the changes that had happened and were happening to the structure of the economy. In addition, it was observed that the changes in monetary aggregates were no longer reliable indicators of current and future developments in inflation. It had also become difficulty to signal the stance of monetary policy, which we believe is critical to anchor inflation expectations. Ladies and Gentlemen, allow me, on behalf of the Board, Management, and Staff of the Bank, and indeed on my own behalf, to recognise the contributions of my predecessors and Deputy Governors to improving the monetary policy framework over the years and providing the solid foundation for the formulation and implementation of monetary policy comparable to those of other central banks globally. Distinguished guests, the MPC formulates the monetary policy of the Republic on behalf of the Bank and prepares this Report. The Committee comprises nine members, as prescribed under the Act, three of whom should be external and nonpublic officers. So far, eight (8) members have been appointed, two of these are external. The third external member is yet to be appointed. Ladies and Gentlemen, you might have noticed that in sharp contrast to the previous Monetary Policy Statements, the Statement published on February 14 was very compressed. This will become the norm and is in line with our objective of publishing the MPR, which provides salient detailed information on what informs the decision of the MPC on the Policy Rate. As earlier indicated, the Report presents a detailed assessment of the path of inflation over the next eight-quarters based on a careful and critical analysis of current domestic and global macroeconomic developments. It also provides an assessment of the MPC view on the balance of risks to the inflation projection. Our expectation is that such an assessment will help provide greater clarity to stakeholders on the basis upon which the MPC arrives at its decisions. It is also expected that the MPR will serve as a credible and reliable reference document for other economic policy makers, researchers, academics, and the public at large on economic developments in the country. The MPR will be published on the Bank of Zambia website soon after each MPC Meeting. Distinguished guests, the monetary policy framework that we are currently using requires a huge amount of high frequency data to gain an in depth and better understanding of recent economic developments and to forecast inflation over a 2/3 BIS - Central bankers' speeches forecast horizon of eight quarters ahead. In this context, the Bank has been collecting real sector data directly from firms through the Quarterly Survey of Business Opinions and Expectations and the Credit Conditions Survey. In addition, the Bank undertakes inhouse policy research, procures technical assistance from various sources, including think tanks, and reaches out to other institutions for collaborative research. All this point to the fact that we, as an institution, have to continually build the requisite capacity, including in modelling and forecasting. For those participating in our surveys, we want to express our profound gratitude for their cooperation. I should hasten to add that under the new Bank of Zambia Act it is a statutory requirement for respondents to provide information when the institution formally asks for it. Ladies and Gentlemen, in closing, let me comment on our regular engagements that we have with you, our stakeholders after each MPC Meeting. We appreciate and value these engagements as they accord us an opportunity to explain our Policy Rate decisions. The ensuing interactions also help us to get the much-needed insights and feedback on your understanding and the implications of our decisions on the economy, which serve as important inputs into our future decision making process. With the publication of the MPR, we hope that you and other stakeholders will be better informed about monetary policy formulation and implementation in Zambia. With these remarks, it is now my singular honour and privilege to officially launch the Monetary Policy Report. Thank you for your attention and God bless! 3/3 BIS - Central bankers' speeches | bank of zambia | 2,024 | 5 |
Speech by Dr Denny H Kalyalya, Governor of the Bank of Zambia, at the tree planting exercise to commemorate Bank of Zambia's 60th anniversary, Mumbwa, 21 August 2024. | Denny H Kalyalya: 60 years of central banking - repositioning for sustainable and inclusive growth in a digital world Speech by Dr Denny H Kalyalya, Governor of the Bank of Zambia, at the tree planting exercise to commemorate Bank of Zambia's 60th anniversary, Mumbwa, 21 August 2024. *** SALUTATIONS His Royal Highness Chief Mumba His Royal Highness Chief Moono His Royal Highness Chief Mulendema Mumbwa District Council Chairperson, Mrs Chali Masumo The District Commissioner, Mrs Namukulo Hayumbu Deputy Governor – Administration, Mrs Rekha Chifuwe Mhango Council Secretary Area Councillors National Heritage Conservation Commission Board Member - Commissioner Muliokela Directors from the Bank of Zambia and National Heritage Conservation Commission Representatives from Various Government Ministries Distinguished Invited Guests Members of the Media Ladies and Gentlemen Good morning It is my honour and privilege to warmly welcome you all and express our gratitude for joining us this morning in the tree planting exercise. This is no ordinary exercise for us. It forms part of our 60th anniversary commemoration. For those among us who didn't know, the Bank of Zambia was established on August 7, 1964, some two months ahead of our country being declared independent on October 24, 1964. To commemorate this major milestone, we thought of doing something out of the ordinary which contributes to the sustainability of the environment we live in. In this vein, we coined the theme of our 60th anniversary celebrations as, "60 years of Central Banking: Repositioning for sustainable and inclusive growth in a digital world." Accordingly, leaning on the United 1/3 BIS - Central bankers' speeches Nations' Sustainable Development Goal (SDG) No. 13, which encourages all of us to take action against climate change, we decided to undertake an eco-conscious initiative to plant trees to mitigate the impact of climate change. Distinguished Guests, the need to reduce emissions from deforestation cannot be overemphasised. You will agree with us that the forest eco-system in Zambia is threatened by land use practices that do not take into account the protection of forests. For society to reach inclusive and sustainable growth, economic agents must participate in economic activity without harming the environment. Distinguished Guests, as we gather this morning, we recognise that our environment is facing numerous challenges, from deforestation to climate change related ones, which are becoming more frequent and severe. It is, therefore, our collective responsibility to address the challenges we are able to and work towards a sustainable future. Planting trees may seem like a small gesture, but in the long run, we believe, it has a significant impact. Each tree we plant today is an investment in the wellbeing of our community and generations to come. The benefits of our efforts today will contribute to cleaner air, improved biodiversity, and a more resilient ecosystem. Distinguished Guests, allow me to reflect a little further on the importance of planting trees. Trees are the lungs of our planet which provide us with oxygen. As Antonio Guterres, the United Nations Secretary General, once said "Forests are lungs of our planet which draw in carbon dioxide and breathes out oxygen." Trees play a critical role in maintaining ecological balance. We need to cultivate a culture of planting trees to mitigate the effects of climate change. Consequences of deforestation are many and dire. These include soil degradation, water conservation and ozone layer depletion, an increase in the atmospheric level of carbon dioxide and extinction of plant species, among others. Distinguished Guests, since trees play an important role in human life, they must be preserved at all times. Failure to do that will result in climate change continuing to impact negatively on human survival. It has been observed that cutting down of trees is not only rampant here in Mumbwa, but in many other parts of the country as well. Good corporate citizenship calls for a conscious alignment of business operations with social, environmental and economic responsibilities to the benefit of both society and the business. I would like to urge everyone, individually and collectively, to develop a culture of planting trees. This is an important way we can contribute to the health of our planet. For us as an institution, the concept of CSR requires us to raise our social consciousness in the communities we operate in. Through this awareness, underpinned by our values, we hold ourselves accountable for the impact our operations have on the environment, seek ways to uplift our society and promote sustainable development. Distinguished Guests, I am happy to inform you that the Bank deliberately chose to partner with the National Heritage Conservation Commission (NHCC) knowing that the saplings we are planting today will be nurtured - taken care of and provided with an environment to grow into mighty trees that will stand for years to come. 2/3 BIS - Central bankers' speeches Distinguished Guests, you may also wish to note that the Bank was presented with a number of sites to be considered for support. The choice of these premises, the Mumbwa Caves, was in recognition of their historic and scientific significance. The caves are an exceptional site because of the deposits and preservation of organic remains found here. The site preserved human and animal bone in some of its 8-meterdeep deposits. The caves are an important archaeological site as they are believed to have provided shelter to prehistoric man and, are an important centre for present day cultural activities as demonstrated by the revival of a number of Kaonde-Ila traditional ceremonies being conducted at the site. Further, the Bank was given an assurance that resources have been secured for drilling of a borehole in the area. With water provided, we can rest assured that the saplings will grow into a forest. As I conclude, I want to urge business houses in the country to develop a culture of planting trees in their various areas of operation. This act will contribute to global reforestation efforts, repair the damaged ecosystem, and engender the culture of climate change mitigation. Let me end by appealing to all of us to save trees in order to save our lives. I may venture say, many of us react to the presence of trees with a pleasant, relaxed, and comfortable feeling. The Bank of Zambia will remain steadfast in supporting sustainable practices. Allow me to extend our sincere gratitude to Their Royal Highnesses, the National Heritage Conservation Commission and all other stakeholders who contributed in one way or another to making this exercise possible. THANK YOU FOR LISTENING. GOD BLESS! 3/3 BIS - Central bankers' speeches | bank of zambia | 2,024 | 8 |
Speech by Dr Denny H Kalyalya, Governor of the Bank of Zambia, at the Launch of the 2023 Banking Industry Survey Report by PWC, Lusaka, 26 August 2024. | REMARKS BY THE GOVERNOR ON THE LAUNCH OF THE 2023 BANKING INDUSTRY SURVEY REPORT BY PwC August 2024 PRESENTATION OUTLINE Introduction State of the Local Economy Liquidity risk Cybersecurity Financial performance and condition of the sector INTRODUCTION ▪ The Survey is a very useful tool to many stakeholders, including ourselves. ▪ The 2023 Report is the Eighth edition. We commend Pwc for this initiative and we appreciate the cooperation of the respondents. ▪ The 2023 Survey Report raises a lot of important issues. However, will focus our brief comments on three top issues raised by respondents: o o o State of the local economy; Liquidity risk; and Cybersecurity STATE OF THE LOCAL ECONOMY ▪ Will look at the state of the local economy through the lens of our recent Monetary Policy Committee meeting. ▪ The MPC maintained the Monetary Policy Rate at 13.5 percent. While actual and projected inflation remain elevated relative to the 6-8 percent target band, the Committee judged that the current monetary policy stance is appropriate. ▪ Inflationary pressures have persisted, with inflation rising to an average of 14.6 percent in the second quarter of 2024 from 13.5 percent in the first quarter. ▪ Persistent depreciation of the Kwacha against major currencies and rising prices of food (maize grain, maize products, and vegetables) and energy, particularly fuel, due to constrained supply continued to drive inflation up. ▪ These factors remain key risks to the inflation outlook, exacerbated by extended hours of electricity load management, continued geopolitical conflicts and tight global financial conditions. ▪ Inflation is, however, forecast to moderate to 12.7 percent in 2025, albeit higher than the 9.8 percent reported in the May 2024 Monetary Policy Report. ▪ In the first half of 2026, inflation is expected to average 10.8 percent. STATE OF THE LOCAL ECONOMY (Cont.) ▪ The MPC decision further considered the impact of the drought and that of the past successive increases in PR, increases in SRR, and the recent reforms in fx market. ▪ In maintaining the PR as opposed to raising it, the Committee also considered the impact on financial stability and growth, particularly in 2024, in the wake of the drought. ▪ Continued implementation of fiscal consolidation measures and structural reforms remains critical to lowering inflation, maintaining financial stability, and creating growth enabling environment and resilience of the economy against shocks. ▪ To safeguard macroeconomic stability needs concerted efforts and strengthened collaboration among all stakeholders. ▪ Prospects in the medium to long-term are very positive. Need to continue with the reform process can hardly be overemphasised. STATE OF THE LOCAL ECONOMY (Cont.) Status of debt service ▪ In quarter 1 of 2024 debt service was only to multilateral and plurilateral institutions . ▪ In the second quarter, there was a sharp upward jump following the conclusion of restructuring of the Commercial (Eurobond Holders) as broader debt service resumed (see chart below). LIQUIDITY RISK Secondly, the industry’s concerns on liquidity risk is noted. However, it is important to fully appreciate the context that informed BoZ actions. ▪ The environment has for sometime now been characterized by strong underlying inflationary pressures, stemming not only from the debilitating drought shock of 2023/24 agricultural season, but also the persistent exchange depreciation. ▪ Managing such pressures points to the need to implement relatively tight monetary policy to contain the inflationary pressures. ▪ We are the first to admit that the Policy Rate, on its own, is not sufficient to manage exchange rate pressures. The Bank has had to complement the policy rate changes with upward adjustments in the Statutory Reserve Ratio. In this regard, in early February 2024 we raised the SRR to 26% from 17% on 5 February 2024. ▪ At the same same time it was deemed necessary that the Government transfers its unutilised deposits from commercial banks to the BoZ. Thus, on 29 January 2024, commercial banks were instructed to transfer such deposits to BoZ. ▪ The increased Statutory Reserve Ratio resulted in a net withdrawal of K8.1 billion of excess liquidity. With respect to Government deposit transfers, between endJanuary 2024 and July 2024 K3.4 billion had been transferred to BoZ —far much less than the projected K12 billion. LIQUIDITY RISK (Cont.) ▪ The less-than-satisfactory performance of the Government deposit transfers meant that the impact was not fully achieved. With this development another way of achieving the intended objective had to be found. The Bank turned to making Overnight Lending Facility (OLF) as the main source of commercial banks’ liquidity as opposed to use of regular Open Market Operations (OMO). ▪ Upon observing relative stability in the foreign exchange market conditions since June 2024, the Bank started to provide commercial banks liquidity relief through the much cheaper OMO facility compared with the OLF (OMO loans currently cost 13.5% whereas OLF is at 30%). ▪ Further relief came by way of restructuring how statutory reserve ratio compliance is to be achieved. This measure was taken within the context of safeguarding financial stability. LIQUIDITY RISK (Cont.) ▪ In June this year, the Bank invited commercial banks to participate in a limited auction of Government bonds up to 40.0 percent of their respective minimum kwacha statutory reserve requirement. ▪ The Government bonds purchased in this particular auction are eligible for statutory reserve requirement purposes. This measure has, so far, moderated the cost of complying with the statutory reserve requirements. But more importantly, risks to financial stability have been contained by safeguarding an orderly functioning of the Government securities market, especially in the face of large maturities that came due mid-year ▪ Overall, the Bank maintained tight liquidity conditions for the most part of the year-to-date to support the foreign exchange market and tame inflation. CYBERSECURITY Cybersecurity has remained a concern for the sector, at least for the past three banking surveys, as product offerings from the sector continue to evolve at a rapid pace towards digital solutions. ▪ At the back of the increased reliance on digital channels for product offerings and services, is the heightened risk of cyberattacks. ▪ Banks are taking deliberate measures to strengthen their cyber defence mechanisms by investing in relevant infrastructure as well as enhancing customer and staff awareness programmes. ▪ The Bank of Zambia launched its 2024-2027 Strategic Plan with a theme ‘Promoting Inclusive and Sustainable Development in a Digitalised World’. ▪ The strategy, seeks to respond to new challenges and emerging risks, and focuses on four main areas namely: Price Stability, Financial Stability, Financial Inclusion and Organisational Resilience and Growth. CYBERSECURITY ▪ One of the initiatives in our strategic plan is Strengthening Cyber Resilience and Fraud Mitigation in the Financial Sector by establishing the Financial Sector Cyber Incident Response Team (FINCIRT); ▪ This is being done in partnership with the Bankers Association of Zambia. ▪ The initiative will benefit the financial sector as it will provide a platform for information sharing which will promote safety and resilience of the sector ▪ As part of the Bank’s efforts to enhance cyber resilience in our institutions and address cyber risk in the financial sector, in 2023 the Bank issued Cyber and Information Risk Management Guidelines for Regulated Entities. ▪ Further, the Bank has commenced Cyber security examinations across the industry, following the issuance of Guidelines in 2023. FINANCIAL PERFORMANCE AND CONDITION OF THE SECTOR Despite these challenges, the banking sector remained Resilient. Was adequately capitalised with capital adequacy ratios remaining well above the minimum requirements. The sector continued to generate sufficient income to cover operating costs, fund growth and augment capital. Liquidity conditions varied across banks and the Bank of Zambia instituted relevant support measures to the sector as alluded to earlier. Asset quality was satisfactory, however, continued to be a source of concern, and the Bank will continue to assess the situation and will institute appropriate measures to minimise disruption to the financial system. THANK YOU | bank of zambia | 2,024 | 9 |
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