Financial Intermediation and Economic Development:The case of the Development Bank of Zambia:1974-1981
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Since independence in 1964, there has been an urgent need for economic development in Zambia, which led to the establishment of the Development Bank of Zambia (DBZ) as a source of long-term finance for development.This thesis examines the role of DBZ in the development of the country,particularly through its investment policies and appraisal methods. It also looks at how the portifolio management decision has been arrived at in the Development Bank of Zambia in order to meet national criteria and requirement.In doing so, it considers how projects financed by DBZ have been important instruments with respect to the following: (1) Contribution to national output, (2) Generation of employment, (3) Effecting linkages with other sectors ,.of the economy, (4) Contribution to reduction in the imbalances between rural and urban development. It was observed that the Bank had developed appraisal techniques of internationally accepted standards. In its appraisal work, emphasis is placed on adequate appraisal and scrutiny of all aspects of the projects such as the managerial, technical, financial, commercial and economic aspects. Notwithstanding this fact, the choice criteria of selecting projects is tailored to the needs and requirements of the country.It was also observed that the Bank had made a significant contribution to the economic development of the country through the provision of mediumterm and long-term finance to both private and parastatal enterprise for development purposes. The bulk of the loans sanctioned by the Bank were mostly for new of existing projects and expansion/ones, which were mostly extended to agro-based industries. However, the Bank has failed to make an impact on the rural sector of the economy. A Province-wise analysis of the distribution of loans sanctioned by the Bank indicates that by 1979, 89 percent of the loans went to five provinces, namely, Central, Copperbelt, Eastern, Lusaka and Southern, while the remaining four provinces viz, Luapula, Northern, Northwestern and Western accounted for 7 percent with the remaining 4 percent being unallocatable.It was also observed that the Bank continued lending to financially big business, to the neglect of small scale enterprises which are not yet covered by the DBZ Act. Indeed, by 31st March, 1981, the average loan amount stood at K577,000 per project which is by far in excess of the minimum loan amount of K25,000 stipulated in the DBZ Act.