Country: Zambia

Inaugural Capital Markets Master Plan launched

Posted on by TIMOTHYRADIER

• Capital Markets Master Plan is a comprehensive long-term strategy which sets out the primary framework for Zambia’s Capital Markets development.
• Zambia’s aspiration is to become a financial hub that will attract financing including Green Bonds.
• The plan aims at enhancing the Government Bond Market by implementing measures aimed at improving market operations.

President Hakainde Hichilema says government has reduced borrowing from the domestic market from K24 billion in 2022 to K16 billion in 2023.
Officiating at the launch of the Capital Markets 10 year Master Plan (CMMP), President Hichilema noted that borrowing too much from the domestic market stifles the required capital for private sector growth.

The Head of State said Zambia’s aspiration is to become a financial hub that will attract financing including Green Bonds and the Master Plan’s focus to improve the traditional security markets which include the stock market, corporate bonds market and collective investment schemes.

“The Capital Markets Master Plan is a comprehensive long-term strategy which sets out the primary framework for Zambia’s Capital Markets development over the next decade. It is an important tool that seeks to organize various actors in a manner that will be convincing, for holders of the capital to consider Zambia as a choice destination for investments. The Master Plan will ensure that Zambia is an attractive destination to not only local, but also foreign investors.”

“I am optimistic that the launch of the master plan signals our resolve to set in motion the necessary interventions required to fully develop our Capital Markets as they are essential for creating employment opportunities for our youth, enhanced access to capital for small and medium enterprises, and facilitate our transition to a green growth economy,” President Hichilema said.
He added that the Capital Markets Master Plan’s other motive is to introduce products such as Green Bonds, private equity, venture capital, real estate investment trusts, and derivatives among others.

“The plan aims at enhancing the Government Bond Market by implementing measures aimed at improving market operations. As a government, we have also realized that borrowing too much from the domestic market stifles the required capital for private sector growth. It is in this regard, that the New Dawn Government has reduced government borrowing from the domestic market from K24 billion in 2022 to K16 billion in 2023 and going forward, we hope to reduce even further,” he stated.

President Hichilema said this in a speech read on his behalf by Minister of Finance and National Planning Dr. Situmbeko Musokotwane.
Speaking at the same event, Securities and Exchange Commission (SEC) Chairperson Ruth Mugala stated that the inaugural launch of the Master Plan is a milestone in the history of Zambia’s Capital Markets.

“The work of actualizing what is contained in the Master Plan has just began As the Apex Regulator of the Capital Markets in Zambia, SEC is mandated under the Securities Act number 41 of 2016, (as amended) to create and promote conditions in the Capital Markets aimed at ensuring an orderly growth, integrity, and developments of the capital markets. The foregoing entails a dual mandate of promoting the orderly development of the markets, on one hand, whilst on the other – protecting investors.”
“We know that beyond our borders, investors are looking our way considering the astute leadership Government has taken towards creating Zambia as an attractive destination for investments,” Mrs. Mugala stated.

Meanwhile, Financial Sector Deepening (FSD) Africa Director-Capital Markets, Dr. Evans Osano revealed that a recent study on the landscape of Green finance in Africa highlights the gap between the funding available that is needed to deliver Africa’s Nationally Determined Contributions (NDCs) that has been estimated at US$277 billion per annum against Climate financial flows into the Continent which are slightly less than US$30 billion per annum.

Dr. Osano added that Capita Markets play an important role in mobilizing much needed long-term finance to fund real and social sectors and build climate resilience, adding that Zambia’s goal to launch Green Bonds in 2024 is very visible.

“The need to build climate resilience in Africa has never been more urgent. I am happy to note that the government’s commitment to providing facilitative environment for climate financing and a series of environmental sustainability measures and the recent budget, includes proposals which will incentivize the development of Green Bonds market,” he said.

The Capital Markets Master Plan (CMMP) is a ten-year long term strategy for capital markets development in Zambia.

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Pension funds, private equity and private debt in Southern Africa

Policy & regulatory development to catalyse larger uptake of private equity and private debt investments by pension funds in SADC.

The primary objective of this study was to review the status quo, understand opportunities and challenges and make recommendations for policy and regulatory development to enable the benefit from the returns and diversification of pension funds in Southern Africa.

We commissioned this research in partnership with the Southern African Venture Capital and Private Equity Association (SAVCA), and the findings presented are drawn from questionnaires conducted with 52 funds in eight countries including Botswana, Eswatini, Lesotho, Mozambique, Namibia, South Africa, Zambia, and Zimbabwe. These funds represent about $160 billion in assets under management (AUM), which translates to 30% coverage of the full AUM of funds in the region. This was complemented by interviews with regulators, pension fund leaders and other experts to collect more specific data and to contextualise the findings. 

Overall, this study paints a picture of a very diverse set of markets in the region with unique challenges, and we aim to strike a balance between providing regional insights with specific issues and opportunities in each market for positive reforms.

Climate finance innovation for Africa

The African continent presents a massive investment opportunity for investors to advance climate solutions in the coming decade, however, a set of barriers to finance have stifled requisite investment to date. In this new report, in collaboration with Climate Finance Innovation for Africa and Climate Policy Initiative, we provide a framework for how innovation in financing structures can leverage strategic deployment of public capital to ‘crowd-in’ private investment at levels not yet seen.

This paper focuses primarily on climate mitigation, which represents the largest investment opportunity for private investors. We refer audiences focused specifically on adaptation to the work done by the Global Center on Adaptation and Climate Policy Initiative on Financial Innovation for Climate Adaptation in Africa.

Cost of credit for financial institutions – case studies in Ghana and Zambia

The overall cost of providing credit is high both in Ghana and Zambia. In 2018, the cost of credit relative to their average portfolio ranges between 26% and 103% for the Ghanaian institutions and between 53% and 80% for the Zambian institutions in the study.

There is a high diversity of the cost of credit across different types of institutions and different credit products. Economies of scale contribute to lower costs of credit.

The cost of operations is the main component of the cost of credit amongst the institutions studied. It varies widely, from between 37% to 80% amongst the institutions, due to two internal factors: product portfolio composition and composition of operational expenses.

Banks that provide credit to corporates have relatively lower operational costs than those providing credit to micro-enterprises and personal loans. Further, staff costs dominate the cost of operations, contributing on average to 52% of total costs.

The cost of funds is driven by the ability to attract cheap sources of funding. Deposits are the cheapest source of funding, but blend financing is also attractive.

There is a high variation in the cost of risk, attributed to both internal and external factors.

Unleashing the power of data to transform businesses

Posted on by Kihingu Inc

Low-income earners, women, and youth who have traditionally been locked out of the financial system are no longer invisible. The advent of mobile money and uptake by this market segment has created data footprints that enable financial service providers (FSPs) to analyse their financial needs. In addition, external research carried out by governments and donors is free and publicly available. This research data is instrumental in enabling financial service providers to obtain a better understanding of clients that they have had no previous interactions with.

The Data Management and Analytics Capabilities (DMAC) project implemented in Sierra Leone, Tanzania and Zambia sought to demonstrate the case for the use of data in the product development cycle of banks, insurance companies, and fintechs. Learnings and lessons from the project implementation have been developed into a toolkit that acts as a guide for FSPs seeking to derive maximum value from their internal data, externally available research data and other third-party data, in order to improve their service offering to new and existing clients.

Read more on how to use data to transform financial services here.,

Where are the flows? exploring barriers to remittances in sub-Saharan Africa

Remittance flows represent an increasingly important source of income for sub-Saharan Africa (SSA). Between 2012 and 2015, formal flows steadily grew at a higher growth rate than foreign direct investment (FDI) and official development assistance (ODA). As a result, the value of formal remittances sent into SSA today almost matches those of FDI and ODA. Formal flows between countries in SSA are greater than ever. However, since 2016, the value of formal remittances sent into the region is no longer growing. Much of which is migrating to informal channels as SSA still has the most expensive corridors in the world, both in terms of sending funds from outside as well as within the region.

Remittances act as key sources of financial support for households: they reduce the likelihood of impoverishment, contribute to improved health and education, and provide greater resilience to financial shocks. To maximise formal remittance impact in the region, the true cost of sending and receiving the funds needs to drop to incentivise higher formal flows. This does not only include a decline in the remittances prices but also improved access for senders and recipients at the first and last mile.

To offer a more detailed analysis of the barriers to formal remittances in SSA, a new report from Cenfri and FSDA outlines the complexities of achieving sustainable cost reductions and increased access for remittance senders and recipients.

Vol. 1 of a seven-part series marks the start by identifying the most prominent corridors within and into SSA in terms of volume, cost and importance for the economy. It also investigates the relationship between remittance flows and migration patterns, used as a proxy to identify pain points in specific corridors. This report is aimed at remittance stakeholders, policymakers and anyone who is interested in understanding the remittance market in SSA in more detail.

Vol. 2 investigates barriers based on deep dives in four different countries in SSA providing the overarching barriers to understand a highly complex value chain. Vol. 3 – 6 provides case studies of the four countries against the backdrop of their unique country context. Vol. 7 concludes with recommendations on necessary policy actions and multi-country approaches for remittance players.

Vol. 3 explores the state of the remittance sector in Uganda and unpacks the key challenges and best practices within the industry.

Vol. 4 explores the state of the remittance sector in Ethiopia.

Vol. 5 explores the state of the remittance sector in Côte d’Ivoire.

Vol. 6 explores the state of the remittance sector in Nigeria.

Vol. 7 aims to provide stakeholders that are active in remittance sectors with recommendations on how to systematically overcome the supply-side barriers to formal remittances in SSA.

Moving money and mindsets: increasing digital remittances across Africa

In 2015, the UK government committed to the UN’s Sustainable Development Goal (SDG 10.7c), which states that the global average cost of remittances should be no more than 3% of the send amount by 2030, with no single corridor being more than 5%.

With its goal to reduce costs and scale formal flows, the UK Department for International Development (DFID) and its Africa-based partner, FSD Africa, are interested in exploring whether there are ways of accelerating the migration of remittance senders from cash to digital channels.

FSD Africa and DMA Global’s research across 7 African diaspora communities in London aims to understand the reasons behind the existing preference for cash-based remittances in the UK-based Africa diaspora community and the main motivators that could – and are – being used for a switch to digital services.

Moving Money and Mindsets finds that the use of online remittance services has surged in recent years, with roughly half of the FGD participants now using formse participants, for the most part, report having switched to using online services within the last one to two years.

The FGDs suggest that the ‘stickiness of cash’ with respect to sending remittances, varies significantly between diaspora communities. Cash was found to be most ‘sticky’ amongst diaspora from DRC, Zimbabwe and Sierra Leone. These are also the ‘receive-countries’ with the least-developed domestic payment systems. A developed domestic payment system is essential for the growth of international digital remittance services. Conversely, the use of online services was most common (and cash least ‘sticky’) among the Tanzanian, Ghanaian and Kenyan participants. These are also the receive-countries with the more developed domes

Biometrics in digital financial services: an overview

This paper presents the results of a focussed, independent analysis of biometric technologies, and considers their application and acceptance for retail payments and conventional financial services for people in emerging economies. In particular, we consider the application of biometrics technologies for population-scale deployments in the retail financial services sector.

Funding the frontier: the link between inclusive insurance market, growth and poverty reduction in Africa

Over the last decade, insurance markets in sub-Saharan Africa (SSA) have grown from 4.5 million risks covered to more than 60 million risks covered today. However, according to this report, insurance penetration in SSA remains amongst the lowest in the world with life penetration at 0.3% and non-life at 0.5%, limiting its intermediation potential and contribution to inclusive economic growth and poverty reduction.

The report takes stock of the state of insurance markets across a sample of 15 countries in the region (Mauritius, South Africa, Botswana, Ghana, Kenya, Zimbabwe, Nigeria, Zambia, Senegal, Tanzania, Uganda, Rwanda, Mozambique, Angola, Ethiopia). It finds, although there is no universal development path of insurance sectors in SSA, they seem to be progressing, at varying speeds, through four different stages of market development: the establishment and corporate asset stage, the early growth and compulsory insurance stage, the retail expansion stage and the diversified retail stage.

The report highlights that, most countries in the sample are locked into the early growth and compulsory insurance stage of insurance market development due to a number of exogenous and endogenous factors, which serve as barriers to the role of insurance in growth. Exogenous factors include barriers such as low income levels, informalisation of the economy and limited financial sector development, while endogenous barriers include small markets, a shortage of skills and data, and limited distribution infrastructure.

Commenting on the report, Doubell Chamberlain, the Managing Director of Cenfri says:

Insurance contributes to growth and poverty reduction in many ways. Over the last decade, the focus in development circles has been on how insurance, or microinsurance, can support resilience, and encourage productive risk taking behavior, amongst low-income individuals.

There has been less of a focus on how insurance markets can support livelihoods of low-income adults through mobilising and intermediating capital for growth. We hope that this report stimulates a new discussion on the role of insurance in supporting economic growth in SSA and invite those interested to follow up with us or FSD Africa.”

Credit on the cusp report

Building healthy credit markets in Africa by 2026

African economies are currently undergoing dramatic changes, including a changing consumer base.  Absolute poverty is reducing as a new class of consumer—the cusp group—emerges.  This group (we call “cuspers”), which now accounts for 23% of sub-Saharan Africa’s population, covers a segment of active earners getting by on $2-$5 per day and straddling the formal and informal worlds.  For this group, healthy credit markets could expand opportunity and enable upward mobility, helping to build a true middle class.  But, for this to happen, credit needs to expand and to do so in healthy ways.

In the Credit on the Cusp project, we look at the experience of cusp group borrowers and the lenders who serve them in three distinctive markets—South Africa, Ghana, and Kenya—to better understand what healthy credit market development would mean for this group.  We explore some ways donors and policymakers can help build credit markets thaard mobility for Africa’s cuspers.