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BOZ Introduces Cap For Microfinance Lending Interest Rates
The Bank of Zambia has with immediate effect introduced a cap on the effective annual lending interest rates that licensed non-bank financial institutions can charge their customers.
This follows similar recent measures taken on commercial banks by the central bank.
Bank of Zambia Head of Public Relations Kanguya Mayondi in a statement released to QFM News this measure has been necessitated on account of the exorbitant interest rates that some non-bank financial institutions have continued to charge their customers.
Mr Mayondi explains that the capping of interest rates is aimed at making borrowing from non-bank financial institutions more affordable and equitable especially to the vulnerable micro-borrowers served by this sector.
He says as a consequence, the maximum effective annual lending interest rate for non-bank financial institutions designated as microfinance service providers by the Bank of Zambia shall not exceed 42%.
He says consequently, the Bank will designate non-bank financial institutions qualifying under this measure.
Mr Mayondi adds that the maximum effective annual lending rate that will be charged by all other non-bank financial institutions will not exceed 30%.
He says the interest caps of 42% and 30% have been arrived at by multiplying the commercial bank maximum effective annual lending interest rate, which currently stands at 18.25%, by factors of 2.302 and 1.644, respectively.
He states that the Bank of Zambia will periodically revise the factors applicable to the non-bank financial institutions interest caps, in response to changes in economic fundamentals and the commercial bank rate.
Mr Mayondi further adds that the conditions will apply to new loans written, while existing loans will be allowed to run their course on the current terms unless refinanced.
Meanwhile the Bank of Zambia has directed commercial banks and business entities to accept cheques issued prior to 1st January 2013 in the old currency.
Head of Public Relations Kanguya Mayondi says the central bank has received reports that certain business entities are some commercial banks are turning away customers holding cheques prior to 1st January 2013 in the old currency.
Mr Mayondi says cheques issued prior to 1st January 2013 in the old currency are just as good and should accordingly be accepted and processed.
He reminds all business entities and commercial banks that the cheques have a validity period of six months and therefore cannot be deemed to be invalid because of the currency rebasing exercise.
Mr Mayondi says Cheques, therefore, should be accepted accordingly as they will be processed through the banking system by dividing the amounts by 1,000 to convert the values into the rebased currency.
He says the Bank of Zambia, in this regard, wishes to remind all business entities and commercial banks that cheques issued prior to 1st January 2013 and in the old currency must be recognized and accepted as payment in order to ensure that well-meaning customers are not inconvenienced.
Posted by
jay
January 4, 2013 at 11:33 am
Finally some sanity in the sector! balya sana!
Nikolai Gogo
January 10, 2013 at 9:39 am
This is the problem I have with the Bank of Zambia. They fail to explain things properly. Even friends I went to school with @ UNZA and work with BoZ were ashamed when I asked the what the factors 2.302 and 1.644 were. we need, as a public, to know what these constants mean. Just as well these could have been 0.302 and 0.644; it is just a constant. Please help people to understand things.
Secondly, you the media need to understand these constants before you even post these for publication. Ok. Thanks for the information. So if you read this MY post Mr or Mrs Editor, find out and get back to me and the public. Thanks for the information anyway.