By 
The Bank of Zambia’s April 2026 Financial Stability Report has raised concern over rising loan delinquencies among public sector workers, despite most borrowing being backed by salaries.
According to the report, loan delinquency levels among civil servants borrowing from microfinance institutions stood at 16.2 percent, significantly above the prudential threshold of 10 percent.
The central bank attributed the trend to over-indebtedness among some civil servants, with evidence that some borrowers were bypassing lending limits by accessing multiple loans from different financial institutions at the same time.
BoZ also warned that increasing defaults on digital and salary-backed loans were exposing vulnerabilities in the household credit market, even though overall household indebtedness remains relatively low.
Read more: Bank of Zambia warns of rising near-term risks amid oil shock, geopolitical tensions
The report noted that the stock of personal loans to households recorded marginal growth, mainly driven by increased disbursement of salary-backed loans.
However, household debt remains subdued, with the debt-to-GDP ratio staying below five percent.
While the low ratio reduces the risk of broader financial contagion due to limited lender exposure to households, BoZ said it also reflected constrained access to credit and weak borrowing levels that are insufficient to significantly stimulate consumption and economic growth.
“Sustained economic growth is key to containing credit risk,” the report stated.
Digital lending and public sector salary-backed loans were identified as key risk areas due to elevated default rates.
The report said digital credit disbursements rose in the fourth quarter of 2025 following aggressive promotional campaigns by mobile money providers, with average loan sizes just below K250.
Despite improved access, non-performing loans in the segment remained high at 18.8 percent.
BoZ attributed rising defaults partly to system failures at some institutions that disrupted automatic loan repayments, as well as weak customer data and incomplete borrower information that hindered recovery efforts.
In some cases, non-performing loan ratios in digital credit portfolios exceeded 50 percent.
The central bank warned that rising defaults could undermine financial inclusion gains achieved through digital lending and urged financial institutions to strengthen Know Your Customer (KYC) procedures, improve risk management systems and upgrade ICT infrastructure to mitigate further deterioration in loan performance.
WARNING! All rights reserved. This material, and other digital content on this website, may not be reproduced, published, broadcast, rewritten or redistributed in whole or in part without prior express permission from ZAMBIA MONITOR.
Comments