Press release number: IFAD 33/05

Rome, 9 September 2005 - A new development programme will strengthen and expand financial services in rural areas of Zambia, especially to families headed by women or affected by HIV/AIDS. The Rural Finance Programme will also provide policy guidance to support the Government's efforts to develop the financial sector.

The US$17.4 million programme is being partly financed by a US$13.8 million loan from the International Fund for Agricultural Development (IFAD). The loan agreement was signed today at IFAD headquarters by the Vice-President of IFAD, Cyril Enweze, and Zambia's Ambassador to Italy, Lucy M. Mungoma.

''This programme supports the Government's Financial Sector Development Plan by creating new community-based financial institutions, promoting rural banking services and testing innovative ways of providing financial services to rural producers,'' said Enweze.

Non-governmental organizations (NGOs) and local microfinance institutions will provide the training and advisory services necessary to create between 1,500 and 2,000 accumulated savings and credit associations. This type of community-based financial institution enables members to generate savings that can be lent to other members. Another 300 to 400 already existing savings and credit groups will also receive support. Special procedures and safeguards will be implemented to ensure their activities are sustainable.

The programme will support the National Savings and Credit Bank's efforts to strengthen its operations so that it can provide financial services to a large portion of the people living in rural areas, including poor households. The bank's strategy will be based on a business plan including measures to improve the bank's capital structure, make management and operating systems more efficient, expand the network of branches, develop new financial products and strengthen the capacity and number of staff. The Government will swap US$1.3 million in debts owed by the bank for equity and provide another US$1.2 million in new cash resources.

A credit facility will enable commercial banks to lend money to companies that contract smallholders and other rural producers for small-scale production. Each bank will decide the terms of its loans, which will allow companies to expand or intensify small-scale production through the purchase of fertilizer, seeds and other inputs as well as small investments such as irrigation pumps, bee hives or fishing gear.

A matching grants programme will offer a total of US$1 million to promote innovative projects to further increase access to rural financial services, for instance by creating rural banking windows for women or testing the viability of mobile banking operations.

Finally, a rural finance unit will be established within the Ministry of Finance and National Planning, with the aim of developing a rural finance strategy and policy. The unit will help to coordinate discussions among Government institutions, banks, financial intermediaries and users of financial services.

---

IFAD is a specialized agency of the United Nations dedicated to eradicating rural poverty in developing countries. Seventy-five per cent of the world's poorest people -800 million women, children and men -live in rural areas and depend on agriculture and related activities for their livelihoods. Through low-interest loans and grants, IFAD works with governments to develop and finance programmes and projects that enable rural poor people to overcome poverty themselves.

There are 192 ongoing IFAD-supported rural poverty eradication programmes and projects, totalling US$6.5 billion. IFAD has invested about US$2.8 billion in these initiatives. Cofinancing has been provided by governments, beneficiaries, multilateral and bilateral donors and other partners. At full development, these programmes will help more than 100 million rural poor women and men to achieve better lives for themselves and their families. Since starting operations in 1978, IFAD has invested almost US$8.7 billion in 690 projects and programmes that have helped more than 250 million poor rural men and women achieve better lives for themselves and their families. Governments and other financing sources in the recipient countries, including project beneficiaries, have contributed about US$8.4 billion, and multilateral, bilateral and other donors have provided about US$6.9 billion in cofinancing.