Lending to Agribusinesses in Zambia

ZIF is an agribusiness lending program in Zambia that was established in 2002
with the support of USAID with the aim of helping commercialize smallholder
agricultural production. Having been in operation for five years, ZIF, which operates
under the umbrella of ZATAC Ltd., a non-profit company, has already become a major
vehicle for increasing the incomes of rural agricultural producers. The government of
Zambia, international non-governmental agencies, bilateral donor agencies and
multilateral lending agencies such as the World Bank, African Development Foundation
and the Swedish International Development Agency have recognized ZIF as an effective
means of channeling funds for the improvement of rural agricultural production in the
country. Although ZIF lends to established medium-to-large sized agribusiness
companies that provide markets to rural producers, more than 95% of its borrowers are
rural small-scale producers, organized into cooperatives.

This article examines whether the lending mechanisms discussed for other
microfinance institutions around the world are employed by ZIF. The research questions
are:

(i) Are the lending mechanisms in ZIF the same as the other leading
microfinance institutions worldwide, or have they been adapted for the
situation in Zambian agriculture?

(ii) What modifications are used to specifically deal with seasonal
production based lending?

To deal with these questions, we need to understand both the environment in
which microfinance institution operate and the complexities faced by such institutions in
providing loans profitably to the poor. In the next section we discuss an economic

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