The European Investment Bank (EIB) is lending EUR 20 million to a group of commercial banks based in Zambia to support investments by small and medium sized enterprises (SMEs). The loan was finalised at a signature ceremony in Lusaka on 26 November 2008 which was attended by representatives from the project promoters – among them, Stanbic Bank Zambia Ltd, Standard Chartered Bank Zambia Ltd, African Banking Corporation Zambia Ltd, Finance Bank of Zambia Ltd and Investrust Bank Plc.

The loan will have an important developmental impact on the southern African country by encouraging private sector growth. The small-scale investments supported by the EIB funds will help to diversify the economy which is largely dependent on copper mining and will create jobs for local communities across Zambia.

Plutachos Sakellaris, EIB Vice President responsible for lending activities in the African, Caribbean and Pacific countries, said, “Small businesses are at the heart of all economies and the EIB is delighted to develop its relationship with commercial banks in a bid to promote growth in Zambia. We expect that this loan will facilitate access to credit for SMEs which have faced high borrowing rates in the past.

The loan to the Zambian financial sector supports the European Union’s development and cooperation objectives in Africa, alleviating poverty and encouraging economic growth by promoting the private sector. The project is supported by Zambia’s government and will be used to finance investments by small companies from a wide range of sectors, including industry, agriculture, tourism and infrastructure.

In addition, the financial advantage of this EIB loan has been maximised to benefit the final beneficiaries – the small businesses – thanks to the EIB’s decision to provide funding in both EUR and USD. Most of Zambia’s export revenues are denominated in USD, therefore the provision of funding in this currency reduces conversion losses and foreign exchange risk.

The first and second tier banks that will channel the EIB funds to SMEs are amongst the best performing in Zambia and most are known to the EIB through similar loans in the past. The EIB also has the possibility in the future to open up these funds to additional financial institutions with the potential to impact positively on the national SME sector.

This is the sixth EIB loan to the financial sector in Zambia since 1994. The previous such loan, totalling EUR 40 million, created over 7000 jobs and enabled investments of some EUR 130 million.

Background notes:

EIB Activity in Africa, Caribbean and Pacific

The European Investment Bank (EIB) is instrumental in implementing the EU’s development and economic cooperation policy in countries outside the Union. The EIB has been a development partner in many African, Caribbean and Pacific (ACP) countries since 1963 through a series of lending mandates from the European Council. The current mandate is based on the Cotonou Agreement of June 2000.

EIB loans in the ACP regions support the alleviation of poverty and the development of sustainable economic growth. The Bank lends from two sources – EIB own resources and the Investment Facility, a revolving fund financed by the EU Member States through the European Development Fund. In 2007, the EIB invested EUR 869 million in the ACP region.

Since 1978, the EIB has lent over EUR 460 million to support industry, infrastructure, financial services and small enterprises in Zambia.