caleb m fundanga : the bank of zambia and the insurance industry speech by dr caleb m fundanga, governor of the bank of zambia, at the end of year cocktail party for the zambia state insurance corporation limited clients, lusaka, 1 december 2004. * * * the master of ceremony the registrar - pensions and insurance authority the board chairman - zambia state insurance corporation the board chairman - zambia state insurance pension trust fund madam managing director - ms muyenga distinguished invited guests ladies and gentlemen good evening! i wish to thank the managing director of zambia state insurance corporation limited - ms muyenga, for inviting me and my wife to be the guest of honour at this end of year cocktail party. despite the fact that the bank of zambia is not directly associated with the insurance industry, this function gives me a rare opportunity to say something about the relationship between the bank of zambia and the insurance industry. in the past few years, the bank of zambia has taken keen interest in the operations and performance of the insurance companies and pension funds. this is because insurance companies and pension funds have a direct impact on macro - economic variables, since most of them are leading players in the government securities market. whenever the government wishes to raise funds, it is these institutions together with commercial banks that provide them. ladies and gentlemen, many of you will agree with me that the recent downward trend and stabilisation in the macro - economic variables, such as interest, inflation, and exchange rates, has induced high levels of investor confidence in our economy. as many of us are aware, a stable macroeconomic environment is one of the critical ingredients for achieving sustainable economic growth and, ultimately, poverty reduction, in our country. in this regard, allow me to reiterate what i have been saying at other fora that the insurance industry plays a critical role in the economic growth and development of any country. here in zambia, the insurance industry, with gross annual premiums of approximately k273 billion for life and non - life business, and about k550 billion for pensions, controls colossal sums of money which could be used for investment locally ; and if properly regulated could contribute to developing a strong financial sector in zambia. however, the problem has been that the insurance industry has been under - regulated for many years. in this respect, it is high time that regulations are put in place to harmonise the operations of this important industry. i have several times been told that the insurance act of 1997 is inadequate in many areas

this area and we are monitoring the situation in the market to ensure that borrowers are enjoying a reduction in their effective lending rates. we do not want the reduction in the base lending rates to be cosmetic, but should be reflected in lower effective lending rates for measures taken so far to be meaningful. furthermore, with the reduction in the corporate tax rate for banks recently announced by the minister of finance in his 2012 budget, the expectation is for a further reduction in lending rates by commercial banks going forward. ladies and gentlemen, this initiative is positive and both bancabc and norfund should be highly commended for it. as a financing institution, i am aware that norfund financing rates are favourable. i want to encourage bancabc to pass the benefit of getting money at bis central bankers ’ speeches favourable norfund rates to the final borrowers so that the sme sector will experience the full benefit of this relationship. i wish to end by wishing bancabc the best and success in growing a successful sme lending portfolio. i thank you … bis central bankers ’ speeches