ZANACO Plc says it has set up a credit guarantee scheme that will lower interest rates on credit facilities for SMEs from next month.

Speaking following the launch of the bank’s refreshed brand, Zanaco Managing Director and CEO, Henk Mulder, observed that lending rates on loan facilities remained unaffordable for consumers, hence the move undertaken by the bank to cut interest rates for its SME segment.

“Together with Ministry of Finance, we have set up a credit guarantee scheme which is starting in early May and it’s all being set up and staffed as well in which for specifically the SMEs sector, there is this credit guarantee scheme. So, there is a guarantee scheme, and if a guarantee comes from the bank for maybe 50 per cent of the loan, then the interest rates automatically based on that can also be lower because the risk is lower. So, that’s one of the things that we have taken as an initiative specifically for the SME sector. This is not only for those involved in agriculture, but SMEs in general. And we will be focusing a lot on that part towards the SME side. Bank assurance will also [be] part of that, so we have taken our initiative to support the SME sector,” Mulder told journalists, Wednesday evening.

“We live in a market economy, so interest rates are defined by the market, and we as Zanaco are a player in the market so we have to follow the market. We cannot do outside the market if you say loans are too high. I agree with you that the loans are too [high] and that’s not good. I am happy that the policy rate has come down strongly already, thanks to BOZ (Bank of Zambia). So the rates have come down. However, you have to look also at the opposite side, if you place money in the bank, how much interest do you want and for how long would you place that money with the bank? That’s a basic cost for the bank. So, if that’s already high in an inflation of 6 per cent [7.4 per cent], that’s more than 30 per cent problem. So, the lending rate, accordingly, is also high,” Mulder added.

Earlier, Zanaco launched a new feature on its mobile banking platform called “Xap Me”, as part of its brand refresh, to enable customers transfer money to any person with a valid Zambian mobile phone number at lower costs.