SMEs must gain from K10 bn stimulus

BUUMBA CHIMBULU writes THE Ministery of Finance has advised Financial Service Providers (FSPs) that the low interest funds accessed under the K10 billion stimulus facility are expected to benefit their clients. The Bank of Zambia (BoZ) has made available a three year facility, targeting small businesses, especially those in key economic sectors to cushion the impact of Covid-19 caused on businesses. According to the terms of accessing the money provided by the Ministry, FSPs are obliged to report to the BoZ the interest rate and any other relief offered to their clients. Interest rates on the market are currently hovering between 28 and 30 percent. “Much as FSPs are free to set the interest rates charged to clients on the advance obtained from the facility, they are obliged to pass on the benefits of the low interest rates on the Stimulus Facility to their clients and to demonstrate that they have done so,” said the Ministry. “The interest rate applicable on the facility will be fixed over the life of each Advance at the prevailing BoZ Monetary Policy Rate at the time of granting the Advance plus a fixed spread of 100 basis points,” the Ministry explained. “The interest will be paid annually with a 12-month grace period and the FSP that offers an interest rate to the client that is within five percentage points from the rate prevailing on the facility will be entitled to an additional borrowing amount equivalent to 20 percent of the initial borrowing amount.” The Ministry also said to qualify for subsequent advances, the FSP should have disbursed the initial amount accessed by clients in the targeted economic sectors as at the time of application. It indicated that an eligible FSP will be entitled to an initial advance that does not exceed the initial borrowing allowance. The initial borrowing allowance, said the Ministry, will be equal to 50 percent of the FSP’s total outstanding amount of eligible loans at the time of the application. “The borrowing limits applicable shall be calculated based on the loan data for the FSP in respect of outstanding amounts of eligible loans at the time of application,” the Ministry said. The Sun