Therefore, in order to ensure that the MFI sector grows in a sustainable manner and to protect public deposits, the BoZ developed the Banking and Financial Services “Microfinance Regulations” which came into effect on 31 January 2006. The Regulations were aimed at strengthening the sector and ensuring accountability and transparency in operations and providing effective smooth integration of the sector into the mainstream financial sector. Honourable Minister, distinguished ladies and gentlemen, at the time of the coming into effect of the Microfinance Regulations, there were only three microfinance institutions licensed by the Bank of Zambia. Today, the number of licensed microfinance institutions has increased to thirteen. This number is expected to increase further in light of the additional applications that are currently being considered. Ladies and Gentlemen, it is pleasing to see the extent to which commercial banks are working at providing financial services to the medium and small scale entrepreneurs. This is so because such financial inclusion is bound to lead to wealth creation. It is imperative that commercial banks, in providing financial services, ensure that the projects they are supporting are financially viable. The role of the commercial bank, in this regard, goes beyond sifting out unviable projects and providing finance for the best projects. As Bank of Zambia, we are pleased to see that the private sector, especially banks, are now taking steps to partner with Government in working towards reduction of poverty through increased provision of financial services to a wider clientele.
As major players in credit provision, Banks have an urgent challenge to provide products that are suitable to SMEs and within their reach. Honourable Minister, at current levels, interest rates are too high for the SMEs to access credit. We urge banks and other financial institutions to continue reviewing the cost of borrowing as part of the process to improve SMEs access to the much needed finances to expand their operations, employ more people, and thereby provide impetus to significantly reduce poverty rates in the country. Honourable Minister, distinguished ladies and gentlemen, in view of the financing gap for the SMEs, the microfinance sector in Zambia has taken a leading role to fill this vacuum. However, the services provided by the microfinance institutions fall short of meeting the demands of SMEs. The sector can be said to be relatively young with the pioneers being established in the early 1990’s. Distinguished ladies and gentlemen, I am glad to note that the conference will also focus on the very important aspect of corporate governance. Corporate governance is vital to building a solid, efficient and sustainable financial system and growth of businesses. Without these sound foundations, the institutions capable of reaching out to the poorest in society will never be encouraged. It is generally agreed that there is a strong link between corporate governance and access to finance.