and recover the loans from the farmers’ sales. Outgrower schemes in Zambia are
unregulated.
Since the early 1960s, government-initiated credit programs were undertaken, all
of which failed, some after recording short-lived successes. Other programs stayed longer
possibly only due to government subsidies. As these subsidized programs weighed down
heavily on the government, they could not be sustained for long. However, very little
research has been undertaken to understand the particular characteristics that led to the
failure of all these efforts. Copestake (1998) describes the Agricultural Credit
Management Program (ACMP) that was launched by the government in 1994 with the
goal of promoting a private sector network for delivery of credit in line with the
government policy to de-subsidize credit. Copestake concludes that despite being
consistent with the credit de-subsidization commitment, the ACMP was not effective in
promoting business development, largely because the lending institutions still viewed
agricultural lending as unprofitable and risky and therefore did not support it.
In another study that relates more to the commercial banking system, Maimbo
(2002) finds that the Zambian central bank’s model to detect deterioration of credit was
adequate, however, many managerial and financial, i.e. credit, risks remained in the
banking system. While the conclusions of Maimbo relate to commercial banking, the
importance of capital management ability and lender-borrower interactions are
generalizable to all lenders.
Demand for loanable funds by small-scale farmers is high in Zambia, and
currently unmet by the existing lending institutions providing credit to this category of
borrowers. Some microfinance institutions concentrate on consumer credit and are
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