While major players hold sway, Zambia's banking sector is witnessing the competition and innovative delivery needed to take advantage of a stable government and macro economy.

Zambia's banking universe, with close to 20 players, is a rich admixture of local, regional, and global entities. Among the larger banks are Stanbic Zambia, Zambia National Commercial Bank (Zanaco), and Standard Chartered Bank. It is, thus, a rather competitive environment, summarized in a TBY interview by Charles M. Mudiwa, the Chief Executive of Stanbic Bank as, “Quite an interesting landscape, as each of the banks brings in different competences and skills, and allows the flow of capital globally."

Liberal-leaning government policy has been conducive to the free flow and diverse channeling of financial resources. The sector is supervised and regulated by the Bank of Zambia (BoZ), which is also the central bank. As the US State Department's Zambia Report of 2013 indicates, the BoZ has in recent years not shied away from pruning and censuring to ensure a ship-shape sector. As the report stated, “Improvements include revoking licenses of some insolvent banks, denying bailouts, limiting deposit protection, strengthening loan recovery efforts, and upgrading the training and incentives of bank supervisors." This said, the sector, and by extension the broader economy, remains curbed by certain endemic obstacles. High among these is limited private sector access to cheap credit, as banks veer toward low-risk ventures. Added to that is a—for most—prohibitively high interest rate climate. So much so in fact, that in December 2013 the government felt compelled to instruct the BoZ to cap commercial lending rates at 18.25%, effective a month later. In a subsequent move, in January 2013, the BoZ put a 42% lid on lending by non-banking financial institutions, to include microfinance companies. Official data reveals that in both 2011 and 2012 financial services accounted for less than 15% of GDP.

Foreign investors have been wary of a less than perfect data availability on credit worthiness; this regardless of the 2007 establishment of Zambia's pioneer credit rating agency, Credit Reference Bureau Africa Limited. In response, the authorities in 2012 shored up banks' balance sheets by raising the minimum capital requirement from $2.4 million to $20 million for locally owned institutions, and to $100 million for foreign-owned banks, stipulating end-2013 for full compliance.


The IMF's Zambia Report 2013 applauds a decade of economic competitiveness that “has been boosted by strengthened macroeconomic fundamentals and a supportive business environment." It also finds Zambian banking supervision, “broadly compliant with the Basel Core Principles." Yet, it warns that, “…weaknesses in infrastructure and human capital, as well as the recently more interventionist regulatory approach and related uncertainty about the policy direction are impediments to continued progress." The Fund alights, too, on the fact that the sector is concentrated, with the top-four banks' assets comprising 60% of total sector assets. Meanwhile, the system's low loan-to-deposit ratio of around 65% confirms, “that the lack of bankable projects and borrowers is the main reason for limited credit delivery."


BoZ's consolidated banking sector income data as of end-June 2014 points to total interest income of ZMW2.1 billion, net interest income of ZMW1.5 billion, provision for loan losses of ZMW88 million, and profit after tax of ZMW634.04 million. Meanwhile, from a ratio perspective for the same period, the allowance for loan losses to minimum provisioning requirements was at 85.2%, down from 88.5% for 1Q2014. In terms of asset quality, the gross non-performing loans to total gross loans ratio was at 8%. The cumulative return on assets for the period (ROA) was 4%, while the cumulative return on equity (ROE) was 19.3%, and the efficiency ratio 57.7%, down from 60.7% in January 2014. And in a bird's-eye view of systemic credit distribution, as of December 2013, total loans and advances were accounted for by personal loans (27%), home mortgages (5.4%), agriculture (19%), manufacturing (10.4%), wholesale and retail trade (8.7%), financial services (2.2%), transport and communications (3.9%), mining and quarrying (7%), construction (3.5%), restaurants and hotels (1.5%), utilities (1.7%), and others (9.3%).


Zanaco is a Zambian powerhouse licensed in 1969, and of previous state bank status. In 2007, a 49% stake was sold to Dutch Rabobank, while the state retained 25%. A year later, the bank saw its IPO on the Lusaka Stock Exchange (LuSE). It boasts Zambia's largest customer base of over 820,000, and its largest card base of over 750,000. For 2012, it ranked first in asset terms at $1.1 billion, with a 17% market share. It ranked third in lending at $495 million, first in total deposits at $817 million, and first in terms of physical distribution with 124 branches and agents, claiming a robust 32% market share, observed that, “Our performance in 2013 was marked by a couple of events. Business growth was strong, at approximately 20% across both business lines and the number of customers increased. It is an ambition of the group to have a million customers by 2015."

Stanbic Bank Zambia is a branch of South Africa-based Standard Bank Group Limited, the principle African banking and financial services entity on the continent. The group boasts total assets of approximately $81 billion. In conversation with TBY, its Chief Executive stressed the bank's promotion of Zambia regionally and beyond through its African Investors Conference, the most recent being held in June 2014, linking government representatives and investors. In terms of focus, “By market share, we have the largest agriculture portfolio in Zambia. In mining I believe we are probably joint-first, if not first. The bank also realizes infrastructure development, having financed Zambia's premier shopping mall, and in the energy sector has signed a deal with Zambia Electricity Supply Corporation Limited (ZESCO), “to provide finance of around $165 million for an 800-kilometer power line from the south to the northwest part of the country. We were also the sole advisors for Copperbelt Energy Corporation (CEC) on the structuring of $70 million capital raised through a rights offer." Meanwhile, in June 2014 Stanbic Bank Zambia signed a partnership deal with MTN Zambia, the nation's leading communications service provider, to enhance its electronic backbone. The deal will provide the bank with enhanced internet, branch, and ATM connectivity.

In the words of Andrew Okai, CEO of the Zambia Unit, Standard Chartered is “the oldest bank in the country, and we have formerly acted as a central bank [which] I think gives us a certain degree of credibility. Listed on the LuSE, the bank holds roughly 20% of total commercial banking assets in Zambia, and, “For the past three or four years, we have continuously been the most profitable bank in Zambia. Over the past three years, we have been consecutively voted by Global Finance Magazine, Financial Times and Euromoney as the best bank."

Awarded for its electronic banking offering, and with a 35-year presence in Zambia, Citi Zambia has two branches in Lusaka and Ndola. A comprehensive trade services and trade finance offering is extended to major cities nationwide through strategic correspondent institution partnerships. “Most recently, Citi contributed $2.5 billion to support the development of the energy sector in Africa," Munalula Mate Director and Head of Markets Zambia & Uganda mentioned in a TBY interview. “It is a known fact that the southern African region has a power supply deficit. The support of Citi will help Zambia to harness the potential that it already has. With power, you are facilitating any sector you want to develop, whether it is mining, agriculture, or tourism," he concluded.

With 60,000 clients in Zambia, and listed on the Nigerian Stock Exchange, United Bank for Africa (UBA) commenced local operations in in 2010, and is active in 19 countries as a pan-African bank. In December 2013, following a capital injection by a third party, UBA Group's holding in UBA Zambia was diluted to 49%, whereupon UBA Zambia ceased to be a subsidiary. For 2013, UBA Zambia had total assets of $70.7 million, more than double the previous year's $31.7 million. Working toward improved financial inclusion, the bank's Visa-enabled pre-paid card—the Africard—leverages e-banking to facilitate state and commercial agricultural payments, especially for the unbanked rural population. Meanwhile, SMEs and utility companies make use of the bank's mobile payment platform.

Finance Bank Zambia, 40% owned by Credit Suisse Group and incorporated in late 1986, today employs around 600 people, with a branch network in excess of 30, while a further 16 agencies ensure nationwide retail and corporate banking representation. The bank extends project finance loans for infrastructural and civil engineering projects. In 2013, it announced plans to hold an IPO for 25% of its shares in pursuit of $250 million to be channeled into growth to catch the tailwinds blowing the local banking sector. Thereafter, the bank envisages international listing on London's Alternative Investment Market (AIM), as well as the LuSE, Johannesburg Stock Exchange, and Nairobi Stock Exchange by YE2014.


According to ResponsAbility, a key independent asset management firm, microfinance in sub-Saharan Africa is forecast to grow by between 15% and 25% in 2014. Worldwide, there are over 10,000 microfinance institutions, some large enough to have become investable propositions in their own right. In many emerging markets, Zambia included, entities such as mobile network operators, banks, and money transfer companies are increasingly bridging the gap between banked and unbanked citizens through mobile payments and e-commerce.

According to Lelemba Phiri, the Managing Director of mobile payment firm Zoona, money transfer services in Africa are vital, too, in developing entrepreneurship via SMEs. “We are doing this in a couple of ways. Firstly by offering the SMEs an electronic payment platform to make and receive payments from their suppliers and customers. Secondly, our agents are independent business people and by leveraging our system to earn money, we are providing them a means of income generation and employment. Thirdly, we provide our agents access to working capital financing to enable them to increase their float and/or to expand to more locations," Phiri explained.