BANKERS Association of Zambia president Leonard Mwanza says the interest rates which banks are currently offering to the private sector have potential to choke businesses.

In an interview, Friday, Mwanza said the association was also concerned about these high interest rates because anything outside the scope of affordability created a problem on the balance sheets of banks in the long term.

“We do realize that high interest rates do choke businesses and when the businesses are choked, eventually it brings problems on the quality of the balance sheet. So indeed we will work within the trajectory we are seeing where interest rates on treasury bills are coming down, inflation is coming down. So once all this starts coming down and is stabilized downwards on a downward trajectory, we should see the structural pricing of interest rates within the banking sector,” he said.

“Once the risks are reduced, we should be able to see a review in terms of risk profile because as you know risk is a key determinant in terms of the ultimate pricing to the borrower. So we are very aligned with the Central Bank’s concern because that is our concern too because anything that is outside the scope of affordability creates problems on the balance sheets of banks in the long term.”

He, however, said there was hope of reviewing these rates soon.

“When banks look at interest rates, first of all when interest rates are high, it’s never in the interest of banks like banks are happy to see interest rates high because we know that higher interest rates brings stress to customers, affordability issues. So we are aligned to the call to reduce interest rates. But interest rates cannot just be reduced, they are fundamental issues that go into the interest rates for instance what drives interest rates, usually what drives interest rates is the monetary policy, the treasury bill rates among others,” said Mwanza.

“So we are happy to have seen quite a significant drop in average interest rate. When you look at where we were three years ago and where we are, the average interest rate was above 30 a few years ago but we are now around 25 percent. We have noticed that the treasury bill rates have now come down by almost eight to 10 percent. Now that is giving a trajectory in terms of where we should see interest rates moving.”