of zambia views this development positively, particularly as recent trends indicate that many institutions in the financial sector are extending their branch networks. 5. however, it is important for financial service providers to complement branch expansion with increased product innovation. the ability to offer a broad range of products and services is the hallmark of financial sector deepening, as different types of products appeal to a wider range of clients, leading to enhanced access to financial services. the bank of zambia, as a regulator, is determined to facilitate viable branch expansion, and the introduction of new and innovative financial products, to tap savings and channel these savings to investment. the boz will therefore continue to work in close collaboration with the financial sector to cultivate partnership in order to establish the framework necessary for build ing strong institutions that will mitigate risks and build confidence in the sector. 6. as at 30th april 2009, natsave held customer deposits in excess of k135 billion with a loan portfolio of k92 billion and served over 120, 000 clients. natsave has also endeavoured to introduce various products such as marketeer and pensioner accounts ( specific savings products for people in these categories ), as well as loan products such as individual loans, salary loans and money transfer services. the development in lukulu therefore offers some hope that rural areas, and especially the agricultural sector, may eventually be offered attractive financial products. 7. notwithstanding this, allow me now to reflect on some of the key challenges in the financial sector that all of us must strive to address : ( i ) increasing access to financial services by the small and micro entrepreneurs who form the backbone of the economy. this sector provides employment for many people who cannot be absorbed into formal employment ; increased access to financial services remains a key challenge to this segment. ( ii ) the boz took a step towards regulating microfinance institutions ( mfis ) in 2006 because these institutions can help in narrowing the access gap in the delivery of financial services. so far, 21 mfis have been licensed but most of these operate along the line of rail providing mainly salary - backed loans. more institutions are still needed to increase outreach and deliver financial services in a safe, sound and sustainable manner ; ( iii ) zambia is predominantly an agricultural country, but lending to agriculture has been limited. the challenge therefore is to devise financial products that meet the requirements of the rural and predominantly agricultural areas while at the same time devising means of protecting the financial institutions from risks associated with

significant strides have been made to improve financial access and introduce more convenient services, more work needs to be done. ladies and gentlemen, this state of affairs hinders people ’ s ability to establish financial transactions. effectively, lack of financial access stifles entrepreneurship and holds back the country ’ s economic growth. for instance, as at june 2010, there were only 258 bank branches and agencies in the whole country. in most cases, these branches or outlets are located in urban centres, with rural areas having few if any branches. conversely as at june 2010 the three mobile phone operating networks in zambia had a total of about 4. 6 million subscribers. distinguished participants, this situation grants us an opportunity to develop innovative approaches of extending financial services. it will no doubt involve remodelling of traditional products, service delivery channels and regulatory frameworks. it is important that all possible alternatives are critically examined for viability, safety and efficiency. some of the alternatives that need urgent examination include bank partnerships with non - bank agents to provide wider distribution outlets for payments and other financial services, and leveraging new technologies such as a common national switch to extend financial services. mr chairman, the mobile money transfer has the potential to act as the fulcrum of branchless banking, which allows provision of transactional banking services without the need of a “ brick - and - mortar ” branch. individuals are allowed to remotely access cash using different technologies, which may include automated teller machines, point of sale devices, mobile phones, payment cards or other smart technologies. to ensure that payment service providers take full advantage of the benefits that come with implementation of a mobile money transfer, they must develop and embrace new business models. these models may be built around the existing large financial flows such as remittances, salary and wage benefits, pensions and other government social benefits transfer system. ladies and gentlemen, although mobile money transfer provides a solid platform upon which to anchor expansion in the coverage of financial services, this goal will not be realised unless all stakeholders participate and play their respective roles effectively. accordingly, banks and other payment system businesses need to utilise this infrastructure to the fullest extent possible by ensuring that various products are developed to extend financial services coverage. at the same time, households and businesses need to change their attitude towards non - cash payment methods. it therefore goes without saying that financial education will be critical in shifting public attitudes and ensuring that the non - cash payment methods are widely utilised by the target market. in this