insurance services to lower - income people, particularly in those areas where traditional financial services are hardly there or do not exist. microfinance is also increasingly being seen as an effective tool for poverty reduction. moreover, when microfinance is provided in an environment where there are sufficient alternatives for diversified household income generation, and where access to information, appropriate physical infrastructure, and integrity in loan repayments are present, can be and it is a key success factor in reducing poverty. ladies and gentlemen, looking back through history, one of the best - known microfinance success stories is perhaps the grameen bank of bangladesh. its success may be expressed in terms of its staying power and that it has offered to help disadvantaged groups to enable them meet basic needs. this has been attributed mainly to its concentration on lending to women groups. around the world, various grameen models have been replicated, especially in south america. within africa, microfinance organizations have emerged in bukina fasso, the gambia, ghana, kenya, malawi, south africa, tanzania, uganda, and zimbabwe, to mention a few. however, what appears to be the common factor in all these areas is the lack of adequate supervision for the sector. in the zambian case, the principal financial legislation, the banking and financial services act of 1994 ( bfsa ) did not provide for the regulation and supervision of microfinance organizations until the 2000 amendment. chairperson, ladies and gentlemen, in most developing and transitional countries, microfinance institutions are using field - based “ best practices ” that have emerged from many years of world - wide experience in providing credit and savings to lower - income groups. however, best practices alone cannot guarantee the success of microfinance programmes in the absence of an appropriate legal and regulatory framework. practioners and policy makers worldwide now realize that without appropriate regulatory and supervisory framework, support from commercial banks and appropriate infrastructure, most microfinance services will continue to be donor - dependant and will remain limited in outreach. ladies and gentlemen, since i have been given the floor i now wish to take this opportunity to briefly share with you the zambian experience with regard to the microfinance market. despite its land - based wealth, zambia faces very significant development challenges. the rapid structural adjustment process that took place during the 1990s has had a harsh impact on our people, with the result that poverty is now widespread in our country. currently, a significant number of the 10 million or so zambians

the current legislation is limited to the financial sector. in view of this, the bank of zambia is currently developing a comprehensive credit reference law that, amongst other things, will have jurisdiction over all credit providers and data sources and will provide for the treatment of credit data. chairperson, allow me to share with you some of the key regulatory and supervisory issues that the bank of zambia is addressing with regards to the regulation of the financial system in zambia and the need to address the supervisory challenges posed by the global financial crisis. these issues include : the adoption of a risk based supervision ( rbs ), enhancing the legislative framework, the determination of capital adequacy, the introduction of a deposit insurance scheme, the enhancement of our lender of last resort regime, and the enhancement of cross - border cooperation through consolidated supervision of financial institutions. risk based supervision is a structured, forward - looking process designed to identify key risk factors to which individual banks are exposed. this approach entails closer interaction with banks and allows early identification of risks as well as close monitoring of the nature and direction of risks as they emerge. the banking industry has recorded notable rapid growth in the last ten years. this growth comes with heightened risk levels. the rbs provides robust mechanisms to ensure that banks have adequate risk management systems to mitigate risks. rbs systematically considers all key functional activities ( business lines and operational areas ) and, within each key functional area, evaluates the level of risk, quality of risk management, and direction of risk. the resulting risk profile of the bank, which is dynamic, will therefore change during the supervisory cycle. this paradigm shift in supervisory approaches requires a permissive legal and regulatory framework. in order to ensure timely and credible information for the effective supervision of banks and other financial institutions, the bank of zambia has been playing a key role in developing the bank supervision application system ( bsa ), which is a southern african development community ( sadc ) region initiative. the bsa is a standardized tool designed for capturing supervisory information, financial and risk analysis and provides a workflow mechanism for communicating the different aspects of the supervisory process. distinguished delegates, the legal and regulatory framework governing the supervision of the financial sector must provide for a fast and flexible way of adapting the banking system to the constantly changing financial landscape. the legal and regulatory frameworks in zambia comprise of the banking and financial services act, chapter 387 of the laws of zambia ; the bank of zambia act, chapter 360 of the laws of zambia ;