Weak credit checks fueling civil servants’ debt crisis, says Chisanga
By Ludia Ngwadzai
ECONOMIST Kelvin Chisanga has backed the Bank of Zambia’s (BoZ) warning over rising non-performing loans among public sector workers, attributing the trend to weak enforcement of debt-service ratios and inadequate use of Credit Reference Bureau (CRB) data by lenders.
In an interview with The Mast, Chisanga said Zambia’s low levels of capital formation had contributed to the country’s current credit challenges, leaving many workers heavily reliant on borrowing to meet their financial needs.
“In the midst of trying to build a credit system to work efficiently, there are challenging factors in the market,” he said.
He said the central bank’s concern was over high non-performing loans linked to public workers.
“This is linked to the problem we see in weak compliance with the debt-service ratio and affordability rules, as well as inadequate use of the CRB system,” Chisanga said.
He warned that the lack of proper credit checks was driving excessive borrowing appetite among Zambians, pushing up debt defaults among public workers.
He said BoZ’s directive to lending institutions to strictly follow debt-service ratios and strengthen responsible lending practices was critical.
“It’s important to fully utilise the CRB data to ensure we do the best job when it comes to credit management, as opposed to the delinquencies we are experiencing in most of the public workers,” he said.
Chisanga commended BoZ for instructing payroll administrators to tighten internal controls and prevent abuse of payroll-based deductions.
“The overall goal that the Bank of Zambia is trying to promote here is to trigger responsible borrowing, to protect consumers, and safeguard the stability of the sector. The financial sector should not have this bad name, this bad sentiment,” Chisanga said.
He said it was important to build a credible credit landscape, which was key to sustaining investment and saving appetite.
“It’s important to look at building the image that can sustain investment, sustain the appetite for saving, and create that credit basket and landscape which should be able to take Zambia forward,” he said.
Chisanga said the measures by BoZ were necessary and aimed at preventing the banking and financial sector from collapsing or facing difficult situations.
“It’s important at this particular point to make a significant move of this nature so that we can balance out key actors. We should be able to see good quality service delivery from the sector itself so that we can warrant the growth that is demanded of this country,”Chisanga said.
