Lending to Agribusinesses in Zambia

The purpose and activities of ZATAC’s microfinance programs demonstrate a
commitment to agricultural sector financing needs. In order to understand the prospects
for sustainability of ZATAC, a comparison of its programs with the notable successes of
microfinance programs worldwide will be presented in the next section.

Comparison of ZATAC Microfinance Programs with Global Institutions

Comparisons of ZATAC with other microfinance institutions were based on Morduch’s
synthesis of five key mechanisms employed by major microfinance institutions he
surveyed. We are not able to determine whether all five key mechanisms (peer selection,
peer monitoring, dynamic incentives, regular repayment schedules and the use of
collateral substitutes) are necessary tools for mitigating credit risk in the microfinance
institutions, or to what extent they are causally related to repayment rates.

Peer selection and peer monitoring were combined into one mechanism, group
lending, since the initial two mechanisms may not be easily observable in the wake of
information asymmetries. Data collected at the ZIF office, coupled with interviews with
key staff in the office, are used to determine whether or not group lending, dynamic
incentives, regular repayment schedules and collateral substitutes are used, and to what
extent. Comparisons of the characteristics of some selected microfinance programs and
ZATAC are shown in table 4.

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