Lending to Agribusinesses in Zambia

ZATAC lends to rural small-scale producers in organized groups, usually
cooperatives and to registered agribusiness companies, especially those that provide
markets for rural small-scale farmers. ZATAC does not provide consumer loans. No
loans are provided to individuals without a specific viable business plan. The table below
summarizes the lending criteria followed by ZATAC and terms of the loans.

Table 2: ZATAC Typical Loan Terms

Criteria	Applicable Terms
Interest Rates	LIBOR¹ rate plus 4% margin on dollar-denominated loans. Prevailing inflation rate² (adjusted bi-annually) plus 2 - 3% margin for Kwacha-denominated loans.
Service/Facility Fees	3.5% on dollar-denominated loans. 5% on Kwacha-denominated loans.
Loan Term	3 - 6 months: working capital, trade finance, seasonal loans. 1 - 3 years: medium term capital loans (e.g. dairy restocking). 3 - 10 years: long-term investment loans (plant and equipment).
Repayment schedule	Flexible (ranging from monthly to lump-sum payable at maturity).
Collateral	Flexible (usually does not require collateral from rural groups).
Group lending	Joint liability through cooperatives (rural and peri-urban), which in turn lend to individual members.______________________________

¹As of March 2007, 6-month dollar LIBOR rate was about 5.32%.

²As of March 2007, inflation rate was 15.9%.

ZATAC bids for implementation of various agricultural development projects.
Where such projects have loan funds available, ZATAC uses the ZIF as the vehicle for
managing and administering the loans. Although ZATAC is moving towards achieving
financial sustainability, that goal has not yet been attained. Usually the fund management
agreements with the funding agencies provide for an eventual permanent transfer of the
loan funds to the ZIF.

Each funding agency has specific target groups or sectors, such as dairy, coffee,
paprika/spices, fresh vegetables for export, etc. However, ZATAC also makes available
loans to advance any agricultural-oriented profitable business including production,
processing, packaging, marketing and/or export financing.

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