Training before lending: Raising new generation of responsible borrowers

By: DOREEN NAWA

IN ZAMBIA’S pursuit of economic empowerment, small and medium enterprises (SMEs) have become the backbone of job creation and innovation. Recognising this, Government, through institutions like the Citizens Economic Empowerment Commission (CEEC), has increased funding for SMEs from K50 million to a whopping K400 million. But with this increase comes a new approach: no more loans without prior training. The Ministry of Small and Medium Enterprises Development has adopted a firm stance – capacity building before cash. At the heart of this strategy is a simple principle: sustainable development requires more than just money; it requires knowledge and discipline. Understanding the ‘soft loan’ advantage Loans provided by CEEC to SMEs are described as “soft loans”, with interest rates ranging from five percent to 10 percent – a significant reduction compared to commercial banks. These low interest rates are meant to support the growth of businesses without burdening them with high repayment costs. However, this well-intentioned support can easily become unsustainable if beneficiaries fail to repay. “If you get K3 million at [five to 10] percent interest, you should be able to pay back. That money is meant to revolve so others can benefit too,” Ministry of Small and Medium Enterprises Development Permanent Secretary Subeta Mutelo said during a recent capacity-building session at the Kafue Industrial Yard in Lusaka. Experts say one of the major reasons SMEs struggle with loan repayment is a lack of financial literacy and business management skills. Many entrepreneurs have brilliant ideas but lack the knowledge to manage finances, keep records, or even market their products effectively. According to the Ministry of Small and Medium Enterprises Development 2024 statistics, 70 percent of SMEs in Zambia identify lack of access to finance as their main barrier to growth. Bank of Zambia statistics also show that 62 percent of SME loan defaults are linked to poor financial management and lack of planning. CEEC reports a 40 percent higher success rate among SMEs that receive training before accessing funds. Trained SMEs under Absa Rise show a 30 percent increase in loan repayment consistency within the first year. And the ZDA 2023 baseline survey had shown that only 35 percent of SMEs in Zambia currently maintain proper financial records. To address this gap, the ministry is rolling out capacity-building programmes nationwide. These sessions, like the Kaizen Institute of Zambia Limited (KiZ), currently happening in Lusaka, equip entrepreneurs with essential skills – bookkeeping, budgeting, customer management and business planning. “Empowering SMEs without training is like building a house without a foundation. They need to understand how to manage money, scale their businesses and create impact in their communities,” Ms Mutelo says. It is undoubted that many SMEs struggle to keep their businesses afloat. “I know of a lot of people even in these markets, after securing a loan from a local microfinance institution, many believe their troubles are over. But within a year, they find themselves behind on repayments, their stock depleted, and their client base shrinking. This is because they lacked training in the first place,” Ms Mutelo says. Madaliso Tembo, a tailor in Kamwala, Lusaka, who attended the training, says she now feels more empowered and ready to reignite her business. “I thought the money alone would change things,” she says. “But I didn’t know how to plan properly. I bought expensive materials without calculating profit margins or thinking about marketing.” Madaliso’s experience is not unique. Across Zambia and the southern African region, many small and medium enterprises (SMEs) face similar challenges – accessing credit without the accompanying knowledge to manage it effectively. A 2023 report by the Common Market for Eastern and Southern Africa (COMESA) found that over 60 percent of SME loan defaults in the region stemmed from poor financial planning and lack of business skills. Experts say while access to finance is vital, training entrepreneurs before disbursing loans is equally important. “Training is not just an add-on; it's a necessity,” says Shula Katongo, a business development expert who attended the meeting at Kafue Industrial Yard. Mr Katongo added: “When SMEs are equipped with basic financial and business management skills, they are more likely to succeed and repay loans. Without it, even the best funding can be misused or wasted.” From training to thriving Ruth Ironside, chief executive officer and founder of Mupapa Wood, is one of the shining examples of what empowerment and training can achieve. “The training opened my eyes to how I can grow sustainably,” she shared. “Through the CEEC loan and the capacity-building support… I have expanded my wood-processing business, employed more people and improved product quality.” Similarly, Jacob Chunga, CEO of Jaja Foods, a local food processing company, credits the training for helping him streamline operations and improve packaging and branding, which has increased his supply to various chain stores. “The skills we gained went beyond business management – they gave us confidence and clarity. That’s something a loan alone can’t do,” she said. Another success story is Mwaba Mutale, a young and dynamic female CEO of Top Soil, a company adding value to leather products. Her participation in the capacity-building sessions gave her the tools to formalise her business processes, access markets and navigate loan repayment smoothly. “I didn’t just learn how to run a business – I learned how to lead one,” she proudly says. Government's industrial yards, including the Kafue Industrial Yard, are becoming not just spaces for production, but also for learning. SMEs operating from these facilities are now required to undergo training before accessing any financial support. This ensures that they know how to effectively utilise resources, remain accountable and contribute to economic growth. Beyond skills, the training programmes instil a sense of responsibility. Entrepreneurs are made to understand that empowerment funds are not handouts – they are investments that need to be paid back so that others can benefit too. This shift in mindset is crucial in maintaining the sustainability of empowerment programmes. As Zambia continues to position SMEs as drivers of economic diversification, Government’s insistence on training before loans is a move in the right direction. By prioritising capacity building, the country is not just giving out loans – it is cultivating a generation of well-equipped, responsible business leaders. PUBLISHED in the ZAMBIA DAILY MAIL on April 28, 2025

When the support ends: The dilemma of over-incentivizing rural farmers

Fertilizers and other inputs are highly funded

By: DOREEN NAWA

IN the lush valleys of numerous rural parts of Zambia, maize, groundnuts, soybeans and cassava thrive under the watchful care of smallholder farmers. 

For years, these farmers have benefited from generous support—from free inputs to subsidized equipment—courtesy of donor-funded sustainable agriculture projects. 

But when the funding ends, many are left wondering how to sustain the gains.

Across Africa, governments and development partners have invested heavily in rural agriculture. The support is often well-intentioned: empower farmers, boost food security, and encourage environmentally sustainable practices. 

Yet, an emerging concern among agricultural experts and policy analysts is that over-incentivizing these farmers may be doing more harm than good in the long run.

"When you create a dependency model, the sustainability of any project is compromised," says Lillian Mumba, an agricultural economist based in Lusaka. "We see a drop in productivity the moment inputs like fertilizer or improved seed varieties are no longer free."

A recent study by the African Centre for Sustainable Development found that more than 60 percent of farmers who received free inputs under donor-funded programs failed to maintain yields after the projects ended. 

The main reason? The cost of maintaining practices introduced under these programs was too high without subsidies.

In Malawi, for instance, a project promoting conservation agriculture among rural farmers reported success during its five-year lifespan. 

But within two years of its closure, adoption rates had fallen by nearly half. Farmers cited a lack of access to tools and composting knowledge once field officers left.

The pattern is similar in Zimbabwe and Mozambique, where well-meaning incentives—including cash-for-yield schemes and free irrigation kits—created expectations that governments could not meet once external funding ran out.

Sustainable agriculture, by its very definition, should thrive beyond the project cycle. Yet in many parts of Africa, short-term incentives overshadow long-term resilience. 

Farmers become reliant on handouts, and when those dry up, so does the motivation to continue the new practices.

Agricultural extension officers argue that instead of giving free inputs, governments should invest in capacity building and access to affordable financing. 

"Farmers need to be taught to run their farms like businesses, with proper planning and market access," says Joseph Banda, an extension officer in Eastern Province, Zambia.

Experts also recommend a gradual phase-out strategy for incentives, combined with the creation of local cooperatives that can pool resources and negotiate better prices for inputs. 

Without such measures, the risk remains that rural agriculture will continue to swing between boom and bust—thriving during project periods, only to collapse afterward.

As African governments push for food security and climate-resilient farming, they must now ask a difficult question: 

Are we setting up our farmers for long-term success, or temporary gains?