The Bank of Zambia (BOZ) has expressed concern over the rising number of non-performing loans among public workers, warning that the trend poses growing risks to the country’s financial sector.
In a statement issued by Deputy Governor Francis Chipimo, the Central Bank says recent financial stability assessments have revealed increasing cases of public workers obtaining off-payroll loans beyond permissible debt limits.
Mr. Chipimo says some borrowers are accessing credit through misrepresentation, failure to disclose existing loan obligations, and multiple borrowing from different institutions.
He says the bank has also noted weaknesses in credit underwriting practices among some lending institutions, including inconsistent use of Credit Reference Bureau (CRB) information and, in some cases, complete disregard of available credit data.
Mr. Chipimo says compliance with Debt Service Ratio (DSR) and affordability requirements remains mandatory, stressing that these measures are critical in promoting responsible lending, consumer protection, prudent credit management, and financial stability.
The Central Bank has since directed all regulated lending institutions to strictly adhere to debt service ratio limits and strengthen responsible lending practices.
The Bank has also urged payroll administrators to tighten internal payroll controls and recovery mechanisms, while taking disciplinary action where abuse of payroll-based deduction arrangements is detected.
Meanwhile, the Bank says it will continue monitoring compliance with the Banking and Financial Services Act and the 2020 Directive on the Provision of Credit Data and Utilisation of Credit Reference Services, warning that necessary measures will be taken against entities that fail to comply with applicable laws and prudential standards.
By Prudence Chita
