The Study does, however, recognize the need to continue to develop the payment system and improve the flow of information between financial services providers as well as with their potential clients to avoid this becoming a binding constraint as the financial system develops. Third, the key constraint to expanding access related to the focus and strategies of individual banks and NBFIs. The Study points out that commercial banks have tended to provide financial services to a narrow group of clients (typically corporate entities and formal sector employees), at a high cost, within a narrow geographical location (typically the major towns and peri-urban areas, and they have made high returns in doing so (see Table 2). Disappointingly, NBFIs have typically served the same client base and have not offered effective competition to commercial banks. 4.1  Initiatives to expand access to financial services  There are a number of strategies being implemented by both the private and public sectors to make the financial sector more inclusive, thereby increasing the benefits to the poor of participating in the formal economy. 4.1.1  Financial service providers  Currently, there are signs that a number of financial institutions are re-positioning themselves in terms of location and product offerings. This is evidenced by an expanding branch network and the range of lower-cost products that are now available in the market. For instance, some commercial banks have begun to offer new financial products and services, particularly in retail and community banking.

The role of Government as shareholder of public NBFIs has been to implement a coherent shareholder strategy to bring these public financial institutions back to commercial viability through provision of financial support. The Government has indicated its intention to further capitalize these institutions for this purpose. 4.1.3  Citizen economic empowerment  The Government has also pushed the issue of “access” to the top of its financial policy agenda and is emphasizing on the need for financial inclusion for all citizens as evidenced by share floatation in favour of Zambian citizens in privatized state enterprises through the Citizens Economic Empowerment Act. 5.0  Sustainability of financial services  5.1  Regulatory framework  The BoZ is responsible for regulating and supervising banks and the specified NBFIs. This entails, among other aspects, ensuring that financial service providers (FSPs), as these institutions may generally be referred to, are adequately capitalized and have risk management systems appropriate for their size, nature of operations and level of complexity. Safe, strong and sound FSPs are vehicles for the provision of sustainable financial services as they better cope with external shocks. A significant part of the BoZ analysis involves reviewing key ratios from financial statements. The objectives of this ratio analysis are, among other things, to discern trends, identify key risk areas to focus on and to compare performance with competitors, industry average or standard. For instance the key ratios relating to banks’ performance in the recent past is shown in Table 3. 4  Zambia: Selected Economic Indicators, IMF 2008.