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Finance
BANKING&FINANCIALSERVICES
The financial sector in Zambia comprises of banks
and non-bank financial institutions (NBFIs) which are
regulated and supervised by three agencies; namely,
the Bank of Zambia (BoZ), the Pensions and Insurance
Authority (PIA) and the Securities and Exchange Com-
mission (SEC). The Banking and Financial Services
Act was amended in 2005.
According to 2010 BoZ figures, there are 17 commer-
cial banks in Zambia, which currently dominate the fi-
nancial system. NBFIs consist of leasing and finance
companies (12), building societies (3), microfinance
institutions (23), development finance institutions (1–
The Bank of Zambia recognizes that financial stability
is essential for strong macroeconomic performance
and execution of monetary policy. This entails ensuring
that financial service providers are adequately capital-
ized and have appropriate risk management systems.
In 2006, the Capital Adequacy Regulations of 1995
were amended to provide for a tiered capital structure
to encourage entrants into the financial sector. The re-
view was aimed at ensuring that banks are adequately
capitalized at their commencement of operations, and
as they operate.
The bank has over the years made progress in modern-
izing payment systems accordingly with improvements
in information technology. The National Payment Sys-
tems Act No.1 (NPSA) enacted in 2007 has enabled
the BoZ to develop and implement national payment
systems. The bank has designated players wishing to
Bank of Zambia, Lusaka.
reviewing its monetary policy framework with a poten-
tially shifting from its strict use of monetary aggregates
to the use of short-term interest rates as the anchor for
new monetary policy.
With regard to the development of financial markets,
the BoZ, in consultation with stakeholders, was to intro-
duce an overnight lending facility to commercial banks.
This will increase liquidity in the money market and im-
prove the effectiveness of monetary policy.
Another innovation will be the introduction of a frame-
work to facilitate secondary market trading of govern-
ment securities and other debt instruments. This will
provide additional liquidity to investors and provide
information that will assist in improving the efficiency of
financial market operations.
To promote financial stability and safeguard the econ-
omy against the lagged effects of the global financial
crisis, BoZ is revising the lender of last resort policy. The
policy will be aligned with accepted international stand-
ards to ensure that it remains effective and relevant
under prevailing circumstances. In addition, the govern-
ment is working on a financial sector contingency plan,
which will deal with problems in a systemic nature.
Furthermore, during 2010 the government is to com-
mence the implementation of the second phase of the
Financial Sector Development Plan (FSDP). This is ex-
pected to improve access to credit and reduce the high
cost of borrowing.
In order to hasten the detection and prevention of finan-
cial irregularities, more resources are being made avail-
able to the offices of the Auditor-General and the Anti-
Corruption Commission. In addition, the government is
introducing a Financial Intelligence Unit to enhance the
fight against financial crime.
The Development Bank of Zambia) and savings and
credit institutions (1 – The National Savings and Credit
Bank). There are also 44 Foreign Currency Exchange
offices (Bureaux de Change), as well as Credit Refer-
ence Bureau Africa Limited, a new entrant to the finan-
cial sector.
The Bank of Zambia
Zambia’s banking and financial system has undergone
a process of modernization and streamlining of opera-
tions. The country’s central bank, the Bank of Zambia,
has improved both supervision and regulation of the
sector. This has included revoking licences of insolvent
banks, denying bailouts, limiting deposit protection,
strengthening loan recovery efforts, and upgrading
the training and incentives of bank supervisors. These
measures have resulted in a financial sector that is rea-
sonably efficient, sound and profitable.
A draft of the Bank of Zambia Act, which aims to give
more operational autonomy to the bank, has been fi-
nalized.