Stepping Up In Zambia


when the COVID-19 pandemic arrived at the borders of Zambia, it arrived in a country already beset by a host of econom


ic challenges.

Zambia defaulted on its Eurobond payments in November, 2020, and was downgraded to default status by both Fitch Ratings and S&P Global Ratings. Focus quickly shifted to a potential bailout package from the International Monetary Fund, but the IMF has remained consistent in its desire to see policy measures and programs undertaken before resuming talks on a restructuring program.

Complicating matters is the upcoming presidential election this August, in which the incumbent, President Edgar Lungu is seeking a third term against stiff competition from opposition parties. This likely means any implementation of a new economic program will not occur until afterward and most likely until the end of the year.


Of course, the pandemic has exacerbated these challenges. Supply chains have been disrupted by border closures. A sharply depreciating Zambian Kwacha and rising inflation are causing imports to become more expensive and are further disrupting supply chains.


Yet, there are reasons for cautious optimism. The price of Zambia’s main economic driver- and contributor of 70% of export earnings- copper, was in free fall since January of 2020. But prices have recently skyrocketed, and many commodity analysts are suggesting the recent runup is part of a longer-term trend. Also buoying the current opportunities, entrepreneurs are pivoting and producing essential goods that are receiving strong demand, as we have seen in other parts of Southern Africa.


Against this backdrop, small businesses and entrepreneurs have been left to fend for themselves for financing. Zambian banks have slowed their lending considerably to both businesses and individuals. This is despite the Bank of Zambia’s attempt to facilitate lending by initiating a program offering low-cost capital to commercial lenders. While growth financing, including capital expenditures, was previously part of the capital small businesses were seeking, the current environment has led to a reshifting of focus to more short-term working capital needs, with many entrepreneurs delaying larger capital outlays until later this year or early 2022.


It is this need that Shared Interest is addressing through its pilot program with Inde Credit (‘Inde’), a nonbank financial institution serving small and microenterprises in the Copperbelt and Northwestern provinces of Zambia. Inde provides critical short-term financing to a wide variety of entrepreneurs that cater to the businesses in these areas. To respond to the pandemic, Inde needed to bolster its balance sheet. By providing a partial loan guarantee for a targeted Covid-19 relief loan portfolio, Shared Interest was able to mobilize additional capital providers to augment Inde’s lending capabilities and reach. Specifically, Shared Interest’s 75% partial loan guarantee of a $150,000 facility will cover a portfolio of loans totaling $200,000. With an average loan size of $12,000, it is estimated that approximately 17 loans will be made during the six-month pilot. Inde Credit expects these loans to create 150 jobs and impact 1,650 members of the communities in which the enterprises operate.

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