23 20 Towards a strategy for microinsurance development in Zambia - A market and regulatory analysis, Centre for Financial Regulation and Inclusion, Business School, July 2009. 21 2010 Budget Address by Dr. Situmbeko Musokotwane, Minister of Finance and National Planning to the National Assembly on 9 October 2009. Accessed online via BoZ website: www.boz.zm. Accessed in January 2010.
operating in Zambia namely ZSIC (life insurance), Professional Life Assurance, Madison Life Assurance, Blue Assurance Services Zambia (registered in 2009), African Life Assurance, Cavmont Life & Asset Management Company Ltd, Cavmont Capital Insurance Corporation Ltd, Goldman Insurance Ltd, Nico Insurance Zambia Ltd, Madison General Insurance, Professional Insurance Corporation (Zambia) Ltd. and ZSIC. Zigi Insurance, which used to be a major player, is currently in the process of being wound down. There is also great potential and need for microinsurance in Zambia. Madison Insurance and NICO Insurance have reached the low-income market through partnerships with microfinance institutions (MFIs). Blue Assurance Services (Zambia) was incorporated by an MFI and focuses mainly on developing microinsurance products for the under-served rural areas20 . As of 2008, there were 21 registered micro-finance institutions (MFIs), a significant jump from 8 in 2007. MFIs are increasingly seen as alternative sources of much-wanted finance to the low–income groups and SMEs. All BoZ-licensed MFIs were adequately capitalized, with total assets amounting to $98.6 million. New entrants’ capital and retained earnings increased the total assets of MFIs by 84 per cent compared with 2007 figures.
While the banking sector has seen the entry of new banks (to a total of 14 banks in 2008) and the expansion of existing banks including to locations previously not served (mainly in rural areas), as well as the increase in the number of microfinance institutions (21 in 2008), access to local finance has been identified by many investors as among the major factors impeding the setting-up or expansion of business ventures in Zambia. For one, locally-available commercial lending rates have remained high, at 27.9 per cent in 2008, albeit down from 27.9 per cent in 2006 and 2007. In addition, there are other stringent requirements such as collateral, mainly land, which many individual borrowers do not have, and the relatively short time-frame (usually a year) given to pay out the loan. The Government has announced that the BoZ will introduce an overnight lending facility to commercial banks to increase liquidity in the market. It will also introduce a framework to facilitate secondary market trading for government securities and other debt instruments to provide additional liquidity to investors21 .
F I G U R E I I . 7: D I ST R I B U T I O N O F LOA N S A N D A DVA N C E S BY SECTOR, 2008
Agriculture, Forestry, Fishing & Hunting
16%
Mining and Quarying
5%
Manufacturing
11%
Electricity, Gas, Water & Energy
2%
Construction
4%
Wholesale & Retail Trade
10%
Resturants & Hotels
3%
Transport, Storage & Communications
7%
Financial Services
8%
Community, Social & Personal Services
1%
Real Estate
5%
Personal Loans
25%
Other Sectors
3%
Source: Bank of Zambia, Annual Report 2008.