Do Not Give Drought Support Facility Fund to Commercial Banks – Economist

An Economist has advised government to consider giving the soon to be launched drought support facility fund to independent institutions and not commercial banks.

Speaking in an interview with Money News, Rita Mkandawire says giving the fund to financial institutions may hinder Small and Medium Enterprises (SMEs) from benefiting from the initiative.

Ms. Mkandawire has charged that financial institutions will look at the profit side and end up only assisting well established businesses rather than SMEs that are struggling, for fear of incurring losses.

She states that government’s plan is well intended but financial institutions may not properly handle such programmes as they overlook small and medium businesses in their financial risk management.

Ms. Mkandawire has cited the Covid fund as an example of how such programmes are mishandled by financial institutions, because only surviving companies had access to the financing facility.

Bank of Zambia will soon roll out a support facility fund which will be provided to eligible financial institutions to on lend to businesses and households operating in the agriculture and energy sectors, especially SMEs to mitigate the impact of drought.