By 
The Bank of Zambia (BoZ) has raised red flags over the country’s rapidly expanding credit market, warning that unchecked lending and lax borrower assessments could push the economy toward a debt crisis similar to the 2008 global financial meltdown.
In its latest edition of Zambanker magazine, the central bank described the current state of the credit business as dangerously saturated, with borrowing having become so casual that “getting a loan is as easy as buying vegetables at a market.”
BoZ observed that fierce competition among lenders — driven by high demand for credit — had led to relaxed lending standards, resulting in a surge of defaulting borrowers and growing non-performing loans.
Drawing parallels with the 2008 subprime mortgage crisis in the United States, the central bank warned that Zambia could face similar consequences if the credit boom continues unchecked.
“The looming loan crisis will be in terms of individuals being so indebted that they cannot escape the poverty trap, companies unable to grow because profits go toward debt repayment, lending institutions collapsing under bad loans, and overall declining economic activity,” the publication cautioned.
A manager at a local microfinance institution told Zambanker that borrowing had become a “monthly lifestyle” for many clients who re-borrow immediately after loan deductions are made from their salaries.
“People in my area of operation have become so addicted to loans that it has become a monthly lifecycle,” she said.
Citing the 2020 Finscope Report, BoZ revealed that 83.2 percent of Zambian adults borrow mainly to meet daily living expenses, while only 12.3 percent take loans to start or expand businesses — a worrying sign of a consumption-driven credit culture.
The publication warned that this pattern fostered dependency and stifled productive economic activity, as many borrowers used loans to sustain their lifestyles rather than invest in income-generating ventures.
Moreover, the central bank noted that many borrowers fail to fully understand loan terms until they are already trapped in a cycle of debt — a situation compounded by the prevalence of informal lenders who offer quick cash at exorbitant interest rates with minimal documentation.
BoZ has urged financial institutions to strengthen credit assessment mechanisms and improve borrower education to prevent a potential debt crisis that could erode household incomes and destabilise the wider economy.
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