It is a well-documented fact that Small and Medium Enterprises contribute largely to employment and national development in Zambia. Despite their huge impact on the economy’, SMEs usually find it difficult to thrive due to lack of access to affordable credit.
Most financial institutions are reluctant to lend to SMEs due to a myriad of reasons with the most notable ones being lack of collateral, information asymmetry as well as poor record management. Given these reasons, banks are usually unable to give SMEs loan facilities using a risk based pricing that offers favorable interest rates.
It is for this reason that the Government through the Ministry of Finance and National Planning incorporated the Zambia Credit Guarantee Scheme Limited. The mandate of the scheme is to facilitate access to finance for Micro Small and medium Enterprises by the provision of credit guarantees through partner financial institutions.
With guarantees provided, it is the hope of the Zambia Credit Guarantee Scheme that there will be an increased uptake of loans by MSMEs with viable businesses but insufficient collateral.
If this is achieved, ZCGS will positively contribute to an enhanced citizenry participation in economic development as envisaged in the Eighth National Development Plan.