Plan to improve MSME access

to Integrated Micro-Finance
in Livingstone and Kasama
Michelo MWEETWA
Zambia Development Agency

Reinforcement of MSME Supporting Organizations
12
th
March, 2009
Introduction
Zambias institutional framework is not adequate in as far as
providing financial services to MSMEs

Providing finance without business support or vice versa is
ineffective in promoting MSMEs according most SMEs.

Zambia Development Agency is heavily centralized as a result a
broad and inclusive financial support initiative has been hampered
due to:
Lack of collaboration between MFIs and Zambia Development
Agency
Lack of regulation for Micro Finance Institutions
Slow implementation of support institutions like the Credit
Guarantee Scheme and Credit Reference Bureau

This plan is aimed at increasing Micro Finance to MSEs in
Livingstone and Kasama and linking the programme to existing
business support programme.

Information Sources
Action plan based on lessons learnt on
- Micro Finance and SMEs in Africa
- Credit Guarantee Scheme in Japan
- SME Finance in Japan Role of JFC
Micro

Issue analysis Summary

MSMEs in Livingstone (Tourism) and
Kasama (Agriculture) have little access to
Micro Finance despite having access to
subsidised Business development Services.

Various causes are outline in the following
tree problem


MFIs lack resources
and capacity to
operate in such
areas
The interest costs
charged by most
MFIs is still high
for MSMEs
Financial
Institutions
shun
MSMEs
Lack of
regulation
and policy to
support MFI
operations

MSMEs lack
collateral and
business mgmt
skills
Expand ZDA
operations at
local level
Review of
Banking &
Financial
Services Act
to allow for
MFIs
Provide cheaper
sources of
Finance to MFI
through Govt
and Donor
funds
Provide MFI
with Credit
Guarantee
Services

Establish
linkage
between MFI
and BDS
Programmes
Ensure MFI
participation
in the Credit
Reference
bureau
MSME in have little access to Integrated Micro Finance
Inadequate
business
support
services
Inadequate
ZDA support
at local level
MFIs usually
borrow at high
interest costs
from other
financial
institutions
MSMEs
considered too
risky

Poor Credit
Culture
Poor credit
environment
Inadequate
training and
credit
officers at
local level
MFI Cash flow
based Lending
Fully fledged
offices
established
Legal
issues
revised
Funds
Obtained
Integrated MFI Obtained
MFI use
services
Purpose of Action Plan
To facilitate the provision of micro
finance in two of ZDAs regional offices
linking them to the current business
development services voucher
programme.
Target Groups

MSMEs

MSMEs Producer Associations

MFIs


Stakeholders
National Credit and Servings Bank
ZDA & regional offices
Credit Guarantee Scheme Committee
Central Bank
Credit Reference Bureau
MSME Association
BDS Voucher Programme
Government and Donors
Expected Outputs
Indicators Status Quo After
Increased number of loans to MSMEs by MFIs By 100%
Increase in MFI deposit services to MFIs By 40%
Number of BDS voucher holders accessing
finance % of total
75%
Increase in MFI Credit Portfolio 100%
Inclusion of MFIs on the Credit Reference
Database
100%
Essential Activities
Review Banking and Financial Services Act
Consultative meetings with key stakeholders
Constitute Project Proposal and Team
Selection of MFIs
Funding Proposals to Government and Donors
Preparation of Operations Guidelines
Monitoring of MFI
Capacity building in ZDA and MFI
Disbursement of Funds to selected MFIs


Division of Responsibility
Expand ZDA operations at local level ZDA, Ministry
Review of Banking & Financial Services
Act to allow for MFIs

ZDA, Central Bank, MFI,
Associations

Provide cheaper sources of Finance to
MFI through Govt and Donor funds

Ministry, Donors
Provide MFI with Credit Guarantee
Services
CGS, MFI
Establish linkage between MFI and BDS
Programmes
MFI, ZDA
Ensure MFI participation in the Credit
Reference bureau
ZDA, MFI, Central Bank
Activity Structure
Government/Donors
ZDA
Fund
Management
Unit
BDS Support
MFIs
Credit
Guarantee
Scheme
Central Bank
MSMEs
MSME Associations
Credit
Reference
Bureau
Financial Resources (Pilot)
US$
Loan Portfolio per town 200,000.00
Start up administration costs

50,000.00
Operations (MFI charges) (Fixed fee + Commission from
repayments)
Guarantee fund 50%
Anticipated Inhibitors
Limited financial resource
Size of Fund?
Slow implementation of other key institutions like CGS and
CRB
Delay of Project
MFI will face extra cost of paying for the credit reference
services
High Interest
Slow implementation of Legal Amendments
?
Political Interference
Irregularities and Abuse
Set up and Administration Resources vs Credit portfolio
funds
Result in Costs exceeding benefits

Schedule
J J A S O N D J
Preparation draft Banking and Fin Services Act amendments

Preparation of Draft Project proposal

Hold consultative meetings with proposed key stakeholders
Submit Act amendments for consideration
Finalizing of Project Proposals

Conduct Needs Assessment by Sector to identify priority sectors

Preparation of Funding Proposals for Government and Donors
Prepare and finalise funding agreement by Govt/Donors

Constitute Project Team
Schedule Cont
J J A S O N D J F
Human Resource development in credit management
Assessment MFIs
Selection of MFIs
Preparation of Operations Guidelines for CGS, MFI, ZDA,
Associations
Establish linkage structures between ZDA, MFI and BDS
Voucher Programme
Conduct operations guidelines workshop for Stakeholders
Finalize Operations Guidelines
Disbursement of Funds to selected MFIs

Monitoring of MFI and Financial Institution Activities
THE END
Thank you for your attention