Seven-year loan guaranty expected to spur economic development through supporting lending to SMEs in Zambia
The United States government, through the United States Agency for International Development (USAID), in partnership with the U.S. International Development Finance Corporation (DFC), launched a loan guaranty with Absa Bank Zambia PLC (Absa Bank) on June 16. The guaranty will support Absa Bank making up to $20 million in loans, in Kwacha or U.S. dollars, to qualifying small and medium-sized enterprises (SMEs) in Zambia. The seven-year guaranty will back 50 percent of each loan’s value, for a total guaranty size of up to $10 million. This loan guaranty will strengthen Absa Bank’s ability to provide loans to SMEs in the agriculture, manufacturing, tourism, and clean energy sectors in Zambia, thereby stimulating economic development through enterprise-driven growth.
Under this guaranty, Absa Bank will receive loan applications from qualified, screened SMEs to grow their businesses. Some of these applications may be from businesses that have already received support from existing USAID technical assistance programs in agriculture, clean cooking, eco-tourism, and manufacturing. USAID will connect those SMEs to this funding opportunity and support them through the loan application process.
Supporting SMEs is a priority for the U.S. government as SMEs are essential to fostering an entrepreneurial mindset that will propel Zambia’s economic development. This partnership is within the greater development approach of USAID of partnering both with the private sector and the Zambian government to take a market-driven approach to Zambia’s development challenges. Much of USAID’s focus is at the SME level where it looks to catalyze greater access to affordable finance through partnerships such as this guaranty.
This partnership helps Absa Bank manage and reduce the risks that it takes in investing in non-traditional sectors and helps to inject much-needed capital into growing small businesses. As loans are successfully paid back, this partnership will show that investing in SMEs in these key sectors makes good financial sense and will boost Zambia’s economic development.
Chargé d’Affaires Sheryl Stumbras and Minister of Finance and National Planning Dr. Situmbeko Musokotwane