Caleb M Fundanga: Strengthening Zambia's financial and private health
sector
Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Second Private
Health Sector Trade Fair, Lusaka, 5 June 2009.
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The Chairperson, Banking on Health;
Representatives from the Medical Council of Zambia;
Representatives from The General Nursing Council;
Representatives from the Zambia Medical Association;
Members of the Zambia Union of Nurses Organisation;
Members of the Zambia Alliance of Private Health Providers;
Representatives from the Pharmaceuticals Society of Zambia;
Distinguished invited guests;
Ladies and Gentlemen.
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It is with great joy and gratitude that I stand to address you at this important Second Private
Health Sector Trade Fair. This occasion brings together many of our esteemed medical
providers from the private sector and other important stakeholders in the delivery of medical
services in Zambia like financial institutions, pharmaceutical distributors, and other
commercial suppliers who support the medical industry.
The Bank of Zambia as regulator of the financial system is committed to strengthening the
financial sector and position it so that it is relevant to the country development agenda by
providing finance to sectors like health and qualified private health providers. I believe this
will lead to the improved quality of medical services provision in Zambia and contribute to the
country's economic growth.
Distinguished Ladies and Gentlemen, the Bank of Zambia, recognizes the important role that
the private sector continues to play in providing health services to much of Zambia's
population. These service providers, whether they are doctors, nurses, midwives, clinical
officers, dentists, or pharmacists offer their clients increased choices.
More choices in health provision allow people to find the best care for their own particular
circumstance and needs. The expanded choices and reach provided by the private sector is
a wonderful complement to the existing public health services.
Furthermore, the recent decision by the Zambian Government to designate Health and
Education as economic sectors will undoubtedly, assist all investors in the health and
education sectors. This entails that investors in these sectors can now enjoy the various
incentives previously available only to investments in the real sector.
Chairperson, In order for the private health sector to truly flourish in Zambia, it is vital that the
government provides an enabling environment that will ensure that private providers of
health services can obtain the financing they need to expand and improve their medical
practices. Most micro, small, and medium enterprise firms in Africa, including health
businesses, only receive 5 percent of their financing through banks, while larger firms get 22
percent of their financing needs from banks. In Zambia, a recent survey on financial
inclusiveness indicated that only about one third of the population is financially served by
banks and non bank financial institutions. Barriers to access to credits identified included;
high interest rates, caps on loans and excessive collateral requirements.
The importance of increasing access of banking services to a larger proportion of our
population cannot be overemphasized. Financial services are a critical tool to help people
step onto the economic growth ladder and create a brighter future by tapping their own
creativity in creating jobs and incomes. It can also be instrumental for broader human
development, by letting clients invest in themselves and seek protection from shocks and
bad fortune.
It is however, gratifying to note that following the survey, commercial banks and other
nonbank financial institutions in Zambia have increasingly become receptive to lending to small
and medium-sized enterprises and have in this regard established departments dedicated to
small and medium enterprise lending and introduced financial products specifically designed
to meet the financing needs of these businesses. In working with Banking on Health, banks
have shown interest in learning about the private health sector, a sector whose business
characteristics were largely unknown to banks. However, banks can still misunderstand the
risks, overestimate the costs, and underestimate the potential returns of lending to sectors,
such as the health sector.
In addition to the structural barriers in the financial sector that limit access to finance, many
private health care providers have limited financial and business-management skills and
often struggle to prepare a bankable loan applications or business proposals. It is difficult for
commercial banks to assess the credit risk of a loan without the financial statements and
business plans to support the loan application.
Chairperson, I am happy to state that "Banking on Health", with support from the U.S.
Government, has worked to address some of the barriers to credit by providing market
research information on the private medical sector to commercial banks and microfinance
institutions so that they can understand the business characteristics of the sector.
The financial management training that Banking on Health provides to health businesses
also lowers the risk of lending to these borrowers.
Ladies and Gentlemen, let me end by pointing out that the challenges arising from the global
financial and economic crisis are huge but surmountable. Major economies of the world are
putting in place various stimulus packages, which are expected to take the world economy
out of the crisis. Without doubt, these measures will benefit emerging and developing
economies as well, provided that we remain committed to pursuing strong socio-economic
policies. Although the global financial crisis has negatively affected the Zambian economy in
many respects and presents serious challenges to maintaining the health of the economy,
macroeconomic stability has been maintained.
The Bank of Zambia has continued to monitor the global developments and take appropriate
measures to maintain confidence in the banking system and avoid systemic risk. It is
important to note that despite the crisis, there still remains investment confidence in the
Zambian economy and one example of this is the number of new commercial banks that
have commenced operations in Zambia in the last 12 months.
The Bank of Zambia is also committed to ensuring the availability of finance to viable
businesses including qualified health businesses. Doing so will help create a foundation for
greater investment in the health of the nation. We appreciate the partnership and initiatives
such as the "Banking on Health" in extending health services in Zambia and look forward to
greater investment in the health sector of Zambia.
I thank you.