The Zambian government has set up a 14 million dollar fund to help peasant farmers and small businessmen. VOA reporter Sanday Chongo Kabange reports from Lusaka, Zambia.
Nearly half of Zambia’s 12 million people are employed in the formal sector -- with government, NGOs or private employers. Others are in the "informal" sector. They are self-employed – they have small businesses or they sell goods along the roadside.
For the most part, this group does not have access to the funds they need to build up their small or medium size enterprises.
For this reason, the Zambian government is creating the "Rural Finance Program." The Rome-based International Fund for Agriculture Development, or IFAD, is supporting the 18.8 million dollar program. IFAD is the major international funding agent for the Zambian project.
Rome-based Jens Sorensen is the country program manager for IFAD. He expects the Rural Finance Program to play a major role in financing projects that have not qualified for loans.
"What the program is trying to physically achieve," he says, "is to increase use of sustainable rural financial services in rural areas. The goal of the programme is to improve the livelihoods of about 150,000 rural households, including poor households, small-scale rural entrepreneurs and salaried workers."
The program is designed to help these groups by establishing community-based financial institutions, like credit associations, which will offer loans to rural dwellers.
Also involved in lending will be a revitalized National Savings and Credit Bank (NATSAVE), which has many rural branches. The Ministry of Finance and National Planning will be responsible for overseeing, running and managing the Rural Finance program.
Small-scale businessmen and farmers may apply for loans at rates lower than those offered by commercial banks. But first they must meet conditions, such as providing minimal collateral -- for example, a piece of farm land or a herd of cattle. If they can’t do that, they can also form a cooperative and apply for a loan as a group, sharing the cost.
Finance Minister Ng’andu Magande says commercial banks have failed to serve this group. For this reason, he says it was necessary for the government to step in.
"The government," he explains, "recognizes that the provision of financial services to the low income groups in rural and peri-urban areas as one of the constraints to economic growth and poverty reduction. We therefore intend to encourage rural finance programs with the aim of enhancing wealth creation and asset accumulation by the low income group whether in rural areas or peri-urban areas."
Besides rural producers, peasant farmers, women and small traders, the Rural Finance Program also aims to help other groups. They include salaried workers, such as agricultural extension officers, school teachers, health and military personnel. Many of them require safe and efficient money transfers and deposit services in rural areas, and between cities, small towns and villages.
The government says the 18.8 million dollar Rural Finance Program is expected to be part of a long-term commitment to bring financial services to long depressed rural areas.
