The Urban Hotel, Lusaka
[Remarks as Prepared]
Good morning. On behalf of the United States government, I am pleased to be here today as US AID launches an exciting new partnership with Absa Bank Zambia and the U.S. International Development Finance Corporation (or, DFC).
It is an honor to launch another partnership with the private sector. With this new partnership, our goal is to spur greater investment in agriculture, promote investment in clean energy for cooking, and support both the manufacturing and tourism industries.
Globally, investing in small and medium-sized enterprises in these sectors has been viewed as risky. Banks often prefer to provide loans to bigger companies that offer a more guaranteed return on investment.
Yet, we know that small and medium-sized businesses are the foundation of any economy, and the Zambian economy is not an exception. However, these businesses are not always able to access the financing that they need to grow. Supporting these small and medium-sized businesses is a priority for the United States because we understand they are the backbone of the Zambian economy, are essential to fostering Zambia’s economic recovery, and have a mindset that will propel Zambia’s future economic growth.
We are honored to partner with a progressive and forward-thinking bank like Absa as it endeavors to support key investments that make good business sense.
This partnership fits squarely within the United States approach of collaboration with both the private sector and the Zambian government and takes a market-driven approach to Zambia’s development challenges. At the same time, this partnership supports Zambia’s 8th National Development Plan.
Much of the United States Government’s focus is at the small and medium-sized enterprise level where we look to increase access to affordable finance through partnerships. U.S. AID, together with the DFC, will help Absa manage and reduce the risks that they take in investing in these sectors, and help to inject much-needed capital into growing small businesses.
As loans are successfully paid back, this partnership will show that investing in small and medium-sized enterprises makes good financial sense and is an endeavor that enables Zambia’s long term development.
Absa will receive loan applications from qualified small and medium-sized enterprises, complete the screening and due diligence and then provide the loans through their normal process.
Some of these small and medium-sized businesses will also receive support from existing USAID technical assistance programs in agriculture, clean cooking, eco-tourism and manufacturing. US AID and the DFC will support Absa, help streamline these processes, and tailor their loan products to small and medium-sized enterprises across Zambia.
At the same time, the DFC and Absa have agreed to a risk-sharing agreement in the form of a loan portfolio guaranty. This guaranty will support Absa Bank in making a number of loans, in sum as much as the equivalent of 440 million kwacha to under-represented borrowers in the small and medium-sized enterprise sector.
This partnership can benefit ANY AND ALL small and medium-sized enterprises working in these target sectors.
Honorable Ministers, Distinguished Guests.
I also want to highlight what this Partnership means for these small and medium-sized businesses.
With these catalytic resources from Absa, businesses will be able to mobilize capital to expand and grow. We all know that growing businesses are the drivers of economic growth for entrepreneurial Zambians who want to improve their lives and create additional jobs for Zambians.
We also know that these investments will help youth and women business owners realize their dream of greater market participation.
I would like to acknowledge the special role the US AID EDGE project has had in fostering this agreement.
Leaders from the EDGE Project are here today to celebrate this new partnership. For almost two years now, EDGE has supported critically needed technical assistance and promoted market connections to small and medium-sized businesses in the agricultural sector so that those enterprises could qualify for loans and better utilize an injection of capital.
US AIDS’ EDGE Project stands ready with a pipeline of strong small and medium-sized businesses for Absa to consider and will continue supporting these entities after the loans are provided. The EDGE Project is a key connector for agricultural small and medium-sized businesses to reach their full potential as market players.
USAID’s A2C Project, will also support local small and medium-sized businesses in the clean cooking sector to take advantage of this guaranty. Zambia has one of the highest deforestation rates in the world, losing approximately 250,000 hectares of forest annually, in part due to charcoal production.
Investing in companies that promote alternatives to the use of charcoal, such as liquid petroleum gas, will help Zambia reverse negative deforestation trends caused by use of charcoal in urban centers and promote the Government’s vision of a green economy. This partnership will show that market solutions are often the most effective and sustainable solutions to development challenges.
This guaranty also opens the window for other investments in manufacturing and eco-tourism, sectors that can potentially become key drivers of the Zambian economy.
Honorable Ministers, Distinguished Guests
Let me close by again thanking Absa for working with us to develop this partnership. Months of work behind the scenes made this loan guarantee and today’s celebration a reality. Thank you, Absa, for taking on the additional risk to consider underserved investment communities and for the vision in considering the significant secondary benefits these loans will have on the women and youth-owned business, and the environment.
Finally, I want to thank the Government of the Republic Zambia, including the Ministry of Finance and National Planning and the Ministry of Small and Medium Sized Enterprises for your presence here today and for continuing leadership as we all work together to support small and medium-sized businesses in Zambia.
Thank you.