On Wednesday, Zambia launched its first-ever Credit Rating Agency whose role would be to measure credit risk and provide independent and credible market information that could guide investment and credit decisions.

ZambiaTrevor Simumba, an international trade consultant, told Xinhua in an interview that for a country like Zamia which has a free market economy, having a local rating agency is good because it will provide investors and financial lenders an opportunity to have a clear picture of the credit worthiness of industries and companies.

“It will definitely result in increased investments. It will make it easier for companies to be assessed by lenders at a fast rate and this will make companies wishing to get capital to expand their businesses get money much easier,” he said.

The analyst further said the launch of the credit rating agency will eventually lead to a reduction in interest rates because the credit worthiness of borrowers would have been known through the rating agency.

“Just like countries are rated by international rating agency which helps them access funds from the international markets easily, this local rating agency will also boost our economy in a way,” he added.

Speaking during the launch of the rating agency, Finance Minister Alexander Chikwanda said it will help leverage the performance of the local capital and money market.

The Zambian minister said it will also address information irregularities in the country, adding that the clarity brought about by credit ratings would ease the flow of funds between investors and lenders on one hand and investees and borrowers on the other.

Credit ratings, he said, had the potential to improve market efficiency and financial stability in Zambia’s financial sector.

According to him, credit has been highly priced in Zambia because of obscure information on the risk profile of borrowers.

Wilson Kalumba, the chief executive officer of the Credit Rating Agency said the idea behind the establishment of the rating agency is to address the gap that had long existed in the Zambian economy on quantification of credit risk.

The rating services would be divided into two parts, namely, assessing individuals and corporate entities.
Zanaco, a bank owned by Dutch lender, Rabobank and the Zambian government, has become the first entity to be rated by the local rating agency with a corporate credit rating of AA+ because of its financial position in Zambia. Enditem

Source: Xinhua

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