Zambia Banking & Financial Services Q2 2018
The financial sector is set to grow 7.3% in local currency terms in 2018, a downward revision from 11.4% previouslyforecast. The reduction in our forecast is partly due to the lower growth in credit, with risk-averse banks choosing to buygovernment securities while restraining credit extension to the private sector and households, and imposing high lending rates. Withthe government resorting to domestic borrowing in order to reduce growth in external debt, private sector credit growth is beingcrowded out. Although asset quality did not improve in terms of bringing down the banking sector's non-performing loan ratio,reductions in interest rates should help the sector resist any build-up of bad loans. Meanwhile, insurance penetration will remain low,and the equity market will be shallow and fail to generate significant investment.
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