High interest rates blamed  for low productivity

Tue, 02 May 2017 10:35:20 +0000

 

By Mailesi Banda

 

THE growth of the manufacturing sector continues to be hindered by high interest rates on borrowing and the collateral demanded by commercial banks, says the Zambia Insti-tute of Policy Analysis and Research (ZIPAR).

ZIPAR lead researcher, Mwanda Phiri, has said access to finance was one of the major constraints faced by both suppliers and non-suppliers of goods and services on the local market.

She said the lack of finance was a hindrance to the acquisition and the enhancement of technology and production techniques required to develop supplier capabilities.

“Particular challenges faced by firms include high interest rates and the collateral de-manded by commercial banks. The financial constraints are exacerbated by the lack of a viable and dynamic financial market that is able to accommodate the risks of small en-terprises,’’ she said.

She said the provision of affordable and adequate finance to local suppliers would allow them to acquire machinery and invest in technology knowhow for them to manufacture sufficient volumes and compete with imported products.

She said it was imperative for Government to improve the policy and regulatory envi-ronment in order to strengthen financial institutions such as micro finance as well as en-courage cooperatives for greater competition and cheaper finance.

She said the establishment of venture capital finance with contributions from the Gov-ernment and private sector should be encouraged with the aim of building local capacity.

She said this would motivate financial players to further improve access to finance by of-fering products such as factoring schemes where manufactures acted as guarantors for suppliers to the bank.

She explained that Zambia had a high propensity for consumption of imported finished consumer goods, adding that this showed that there was potential for increased produc-tion of goods in the country.

Ms Phiri said the country’s comparative advantage for agricultural produce that served as a raw material for processed foods suggested the potential for increased value addition in agro processing activities.

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