Credit access in Zambia is limited with only 38 percent of adults having some level of formal financial inclusion. While this number represents progress — as that percentage used to be a mere 23 percent — it also indicates that there is still room for development in the private and financial sector of Zambia.

The Financial Sector Deepening Zambia (FSDZ) is making a substantial effort to increase the availability of financial services and credit access to individuals in Zambia. By working with financial service providers, policymakers and civil society, FSDZ is creating an environment of greater financial inclusion in Zambia.

The Root of the Lack of Credit Access

One of the largest economic drivers in Zambia and several other developing countries are Small and Medium Enterprises (SMEs). SMEs are pivotal to increasing the economy, as they often provide opportunities for low-income people and contribute to Zambia’s GDP by creating growth opportunities. In Zambia, the SME sector comprises approximately 97 percent of all businesses.

However, a majority of SMEs in Zambia face obstacles when attempting to gain support from Financial Service Providers like banks and microfinance institutions to grow their portfolios. According to a business survey conducted in Zambia, a majority of SMEs do not belong to a formal business association or network. Due to this, business owners and farm owners often can only rely on their limited network of friends and family for business, which is not a sustainable growth model.

Conversely, financial institutions emphasize that SME owners often do not have the capacity to prepare bankable business proposals, which was a large constraint to accessing finance. Better relationships between Financial Service Providers and owners of SMEs may create a path of greater understanding and thereby greater financial inclusion.

Long-Term Effects of Enhancing Zambia SMEs Access to Finance

Improving credit access in Zambia and addressing its financial inclusion strategy is key to not only increasing formal financial inclusion but also to growing and developing Zambia’s ever-changing economy. Increasing financial literacy among small and medium enterprise business owners will allow them advocate for themselves among financial institutions. Organizations like International Trade Centre (ITC) work to do just that, facilitating access to financial supply for SMEs with high growth potential.

So far, ITC has provided 105 growth-oriented small or medium enterprises with business development training and individual counseling that improves business management. All of the SMEs that underwent training developed growth strategies that helped them increase sales, invest in new technologies and hire more staff. Through the timeframe of the project, 50 percent of the SMEs that received support and training were able to access formal finance.

The Ripple Effect

Increasing financial inclusion in Zambia will have a ripple effect: if Financial Service Providers provide access to services to owners of SMEs, then SMEs will have more room for growth. If SMEs grow their businesses, then there will be more opportunities for employment, especially for the country’s poor, thereby decreasing poverty rates.

There is still much that needs to be done for Zambia to become more stable as an economy. However, if business owners receive more access to formal financial institutions, then credit access in Zambia will produce many opportunities for its citizens, lead to a more robust economy and alleviate poverty rates.

– Shefali Kumar
Photo: Flickr

Poverty in Zambia
Zambia, officially called the Republic of Zambia, is a landlocked country in southern Africa. Despite improvements in recent years, economic growth in the country is unable to support the high rate of population growth and the burden of HIV-related issues. Here are 10 facts about poverty in Zambia:

Top 10 Facts about Poverty in Zambia

  1. In Zambia, over 50 percent of people live below the poverty line.
  2. Over 70 percent of the total population lives on less than one dollar a day by the year 2000.
  3. Due to high food prices coupled with extreme poverty, families spend 64 percent of this income on basic food needs.
  4.  The effects of poverty are seen in children’s development. More than one-third of Zambia’s under five years population is stunted due to malnutrition.
  5. Lack of access to nutritious food also poses a problem. High consumption of unhealthy diets, including an over-reliance on maize, has led to the problem of obesity, particularly for young women.
  6. Poverty is worst in rural Zambia, where 88 percent of people live below the poverty line.
  7.  Disparities between rural and urban areas are also considerable, with 64 percent of urban Zambians having access to safe water, compared to 27 percent for their rural counterparts.
  8. Even in urban Zambia, approximately 70 percent of urban dwellers live in slums.
  9. Zambia’s population is rapidly growing at 2.8 percent per year. Due to its large younger population entering reproductive age, even more stress is expected to be placed on demand for jobs, healthcare, and other services.
  10. While still low, Zambia’s ranking on the Human Development Index has increased significantly, from 167 to 141 out of 188 in the span of a year.

While the burdens of disease and geographical restraints have made it difficult for Zambia to pull itself out of poverty, improvements in both qualities of life and the economy will hopefully lead to shrinking poverty in Zambia in the coming years.

Alexi Worley

Photo: Flickr

education in zambia
At a glance, the educational system in the Republic of Zambia is not that different from the system in the Western world. Children can be taught in grades one through 12, and there are even opportunities for higher education. The major difference between education in Zambia and the Western world lies in access to adequate schooling.

There are 7,368 schools in the country, and yet a quarter million children do not attend one. According to UNICEF, 47 percent of those enrolled in school eventually drop out. This could be due to the fact that school is only free up until the seventh grade. While 80 percent of the children take advantage of the free education when they can, only seven percent manage to continue that education once a fee is required.

Even when it is free, the education in Zambia is lacking. There are not enough teachers to go around, leaving up to 20 percent of students without a regular teacher. Teachers are not the only scarcity in Zambia; basic supplies like books, pencils, chalk and even chairs are rare.

Without proper education, Zambia will remain in economic distress, as 92 percent of the citizens are unemployed. When 78 percent of citizens live on less than a dollar a day, paying for the necessary education is almost impossible. It is a vicious cycle of poverty for the people of Zambia.

Not being educated can affect life in more ways than one: many Zambians are not informed on HIV/AIDS protection among other basic life skills to increase livelihood. As of right now, the average life expectancy for a citizen of Zambia is 36—the lowest life expectancy in the world.

Combating this poverty is a large task, but improving Zambia’s education is a good start. With better education, Zambians can not only live more prosperous lives, they can have lives, period. If Zambia is aided with what could be considered the simplest of things—pencils, books and teachers—the life of an average Zambian could look very different than it looks today. Their education is very much linked to their livelihood, so aiding their schooling does not just improve their knowledge—it can save lives.

– Melissa Binns

Sources: Zambian, UNICEF, Zambia Scholarship Fund
Photo: Post Zambia