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.
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Members of the Board of Directors, Stanbic Bank Zambia Limited
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Stanbic Bank Zambia, Managing Director, Mr. Joseph Chikolwa
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Management and staff of Stanbic Bank Zambia
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Distinguished Invited Guests
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Members of the Press
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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.