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Working Paper 245 - Sectoral credit concentration and bank performance in Zambia


One of the hallmarks of Zambia's economic policies initiated in the early 1990s was the removal of administrative controls on credit allocation and in setting of interest and exchange rates. The reforms also entailed improvement of supervisory and regulatory framework governing the financial sector in general and the banking industry in particular. Prudential regulation and supervision framework has been strengthened, and banks’ setting of interest rates is now determined by risk-return considerations. Over the past three decades, significant progress has been made with regards to the operating environment in the financial sector. The number of commercial banks has increased. The past decade has particularly witnessed a wave of foreign bank participation in the Zambian banking industry. Out of the 19 registered banks in 2014, 13 were subsidiaries of foreign banks, 4 were locally incorporated private banks and two were partly owned by the government. In turn, the entry of new banks has helped raise the level of competition. In 2014, the share of the four largest (foreign) banks in industry assets stood at 55.4%, down from 68% in 2008.

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