ONE major challenge that small and medium enterprises (SMEs) face today in Zambia is the source of business financing.
SMEs have a challenge in accessing loans from financial institutions in the sense that banks have standards which in most cases are not attainable by most of these small businesses.
One specific requirement which is demanded by commercial banks is the issue of collateral. It is not feasible for a small business to acquire a loan from a commercial bank in the absence of collateral and worse still, the banks have set minimum amounts that a business may allow to get which may be too high for a small business.
This is so because the banks are in business and use the client’s money to lend to their customers with a view to earning interest which forms the bulk of their income.
And in this case, the banks make it a point that the money which is lent to its customers is secured and made safe.
However, in this column today, we shall look at one micro finance institution that has over the past few years, dedicated itself to fill this gap of indentifying and helping out the SMEs in accessing the business loans in more relaxed conditions suitable for emerging small businesses in Zambia.
We look at Pulse Financial Services Limited, which is trading as Entrepreneurs Financial Centre(EFC) and before we look at this organisation in detail, I thought it prudently that we should trace its origins in this country.
PFSL which was formerly known as Pulse Holdings Limited started as care Zambia project in the year 1996.
Its initial project undertaking was to give out small loans to the less privileged individuals who could not access such credits from the main stream banking institutions.
It gave out group loans to small businesses, it operated salary based loans mainly to government employees and it also gave out staff loans to reputable organisations through the signing of a Memorandum of Understanding (MoU).
This initial project, however, met with a number of challenges that saw the PHL financial muscle shrink and needed recapitalisation for it to stay afloat in business.
And one of the main challenge the institution faced was something to do with the bad repayment culture of loans by those who got them and the internal administration procedures in data processing which was inefficient and slow.
The group loans, salary based loans for government employees and the loans advanced to members of staff of reputable organisations through signed MoUs, posed the same loan repayment problems which affected the income generation.
However in the year 2008 the PHL which was transformed into PFSL started going through changes and one of the shareholders who came in and helped with transformation is an institution known as Development International Desjardins (DID) from Canada.
The reorganisation which saw the suspension of the group business loans among others, saw DID, bringing in a wealth of experience in the dispensation and management of small business loans.
The institution also brought with it the in house Spanish software computer programme called SAF.
The Spanish software programme brought instant update of information immediately the data was fed into the system.
The company which had the reduced workforce of 15 and now has 238 members of staff had to go through re-training of credit officers to market its product.
The target was small businesses with no bank accounts.
The credit officers were trained to analyse small businesses and making recommendations to the loan committee which later approved or rejected the loans.
In this way it created a ready market for its products.
The institution which is licensed as deposit taking microfinance institution with central bank started changing its operations to set new standards by taking a strategic position of contributing towards the growth of the financial sector through enhancing of financial inclusiveness of minority groups and equity in the way the financing of small businesses is made in Zambia.
From 5,000 customers in 2009, the institution has grown its customer base to more than 25,000 and with loan portfolio of K85,000,000 in 2009.
The institution has given out loans to small businesses in retail, manufacturing and farming sectors among others.
The loan repayment structure amounts to 98 per cent recovery making it a successful microfinance institution as at now.
The institution has since opened branches within Lusaka and spreading its tentacles to Kitwe and Chipata in Eastern Province.
It offers loans as little as 1,000 Kwacha (marketeer loans) to as much as K350,000 with maximum paying period of 60 months and offers flexible terms which include collateral of house goods depending on the amount being applied for.
Its target is the small business with serious ambition of growing and one of the qualifications is to analyse the seriousness of business and the capacity to pay back the loan.
PFSL trading as EFC occupies a strategic position in the Zambian financial sector and has promoted the life line of small businesses which now can walk in any banks to borrow because of their backgrounds created by this determined microfinance institution.
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