A few banks continue to enjoy an oligopolistic position and this in a way explains why some inefficiency remains in the provision of services. The banking sector has remained fragmented, with insufficient and distorted competition, thereby rendering it rigid in its activities. Competition is not strong enough to lead to a convergence of prices, which would ensure that banks have more or less the same prices for their services and products, affordable to most people. This could also partially explain why finance service providers are not revising their interest rates and charges in tandem with the movements in key macroeconomic indicators such as inflation. Whereas the Bank of Zambia is conscious to the fact that the financial institutions are in business and are therefore expected to make profits, there is a need to make financial services more affordable in order to provide an impetus to promote economic growth and reduce poverty levels in the country. Low interest rates reduce the cost of doing business and encourage investments in key sectors of the economy. 6.0  Legislative provisions on interest rates and the cost of borrowing  The Banking and Financial Services Act (BFSA) does not have any provision for the regulation of interest rates that financial service providers can charge. This is in line with the principles of liberalisation and a market driven economy. However, in accordance with the Banking and Financial Services (Cost of Borrowing) Regulations of 1995, all credit providers are mandated to disclose their costs of borrowing in full before issuing a loan.

Access to other institutions like the European Investment Bank is also possible. (viii)  Development of the capital markets has also made it possible for corporates to raise long term finance. Stock markets enable firms to acquire much needed capital at relatively lower cost, hence facilitating capital allocation, investment and growth. (ix)  Other innovative financial products introduced on the international capital markets include diaspora bonds and carbon credit financial instruments. There is need for Zambian businesses to take advantage and understand these financial products in order to access funding from multilateral institutions. 5.0  Competition in the Zambian financial sector  The BoZ recognises that competition is an essential element in the effective and efficient operation of a market economy. In this regard, the licensing regime encourages entry of players that will foster integrity, innovation and competition while deepening and widening the financial sector. 4  BIS central bankers’ speeches  The presence of reputable financial intermediaries is expected to increase competition, which in turn would lead to an improvement in the quality of domestic financial services and allocative efficiency, reflected by lower operating costs and narrower margins. The increased efficiency of financial intermediation would eventually be translated into higher returns for domestic savings and greater efficiency in the pricing of credit and other risks and in the allocation of credit. However, despite the growth in number of financial institutions in Zambia, this development has not had a very significant impact on promoting competition, as most of the banks are small in terms of size.