Sweden: supporting innovative financial services in Zambia

UN Capital Development Fund (UNCDF) and the Swedish International Development Cooperation Agency (Sida) are launching today a new partnership to address the challenges Micro, Small and Medium Enterprises (MSMEs) face in Zambia using digital technologies when they need credit or capital to run and grow their business. 

The service offerings that will be set as a result of this new partnership target entrepreneurs like Mary who trades millet and sorghum with merchants in northern Zambia. It will help her easily keep track on her orders, customers and suppliers through her mobile phone. Periodically, she supplies buyers from across the border in the Democratic Republic of Congo; at other times, she does not have the capital to purchase her grain from farmers. This impacts her business, especially if she has orders pending. A lack of capital or credit is an issue many MSMEs face that prevents them from meeting their daily needs and growing their businesses.

Longstanding partnership

“We are pleased that Sweden has extended its long-standing partnership with UNCDF into Zambia. This partnership stems from our common vision of building inclusive digital economies that leave no one behind in the digital era. Our partnership aims to support the MSME sector in Zambia with innovative financing instruments. Digitalizing financial services for MSMEs will impact under-served segments such as women and youth and contribute to Zambia’s development” said Henri Dommel, UNCDF Director Inclusive Finance.

Through the project, the two organizations aim to increase access to and the usage of credit facilities such as Pay-as-you-go solutions for digitally-enabled MSMEs in sectors such as finance, energy, agriculture and trade. This will improve the services they offer and the reach of those services.

Smaller companies are important

MSMEs are a large sector in Zambia’s economy, accounting for 88 percent of employment. As such, they bring stability to the economy and enable Zambians to earn decent wages and engage in decent work. Therefore, the need to strengthen the MSMEs’ delivery of products and services to those in key population segments such as rural people, women and youth is important to sustain economic activity. By using digital means, these products and services can better reach all sectors of the population in all parts of the country.

UNCDF will work with MSMEs and enable them to leverage the digital financial services ecosystem that has been strengthened over the last six years. The numbers are telling with active digital finance users increasing from 2 percent of the population to 44 percent of the population between 2014 and 2019. The technical assistance offered to MSMEs will also capture how these businesses adapt to the post-Covid business environment. UNCDF and Sida aim to work with businesses that proactively work with gender equality, and inclusion of youth in their businesses, to ensure they can better succeed.

Backbone of the economy

MSMEs in Zambia are the backbone of the economy but face challenges in access to finance and business management, leading to a “productivity gap” said Ms Susanna Hughes, the Head of Development Cooperation at the Embassy of Sweden in Lusaka. “We believe that digital financial services can reduce this gap and contribute to poverty reduction, improved livelihoods and economic growth. We also believe that digitally enabled MSMEs are really important in providing services – and job opportunities that benefit women and young people.”

For more information, visit http://www.sida.se