Lending to Agribusinesses in Zambia

agribusinesses include commodity purchases for processing, export transaction
costs and other trade finance requirements. This way, new and growing
cooperatives can tap into the capacity of the larger agribusinesses to process and
add-value and get market guarantees for their produce. It works also to improve
loan repayment rates for the lender.

Conclusions

While features of the ZATAC Ltd. group lending programs resemble the lending
mechanisms of leading microfinance institutions worldwide, more differences than
similarities exist. Some of the differences result from seasonal agricultural production
and its unique credit needs. Microfinance institutions serving consumer and small
business borrowers cannot enforce repayment tied to production through cooperative
marketing channels, as ZATAC Ltd. does. Other notable distinctions of ZATAC Ltd. are
larger loans and relatively low interest rates. The relationship of loan size and interest
rates to default and to sustainability are interesting empirical questions for further study.

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