Businesses in Zambia and across the world are facing unprecedented economic challenges brought about by Covid-19. The pandemic and resultant lockdowns and mobility restrictions have dealt a severe blow mainly to small and medium enterprises. Most of these enterprises are facing a significant decline in revenue, which means they cannot meet their financial obligations. This has seen companies’ close shop or led to job losses. Financial support during this crucial period can make the difference between a company staying afloat or closing permanently.

Thanks to Prospero, small businesses in Zambia now have a lifeline. The entity has set aside £1 million to provide concessional funding to qualifying SMEs who have experienced hardship under the current Covid-19 pandemic and other economic headwinds. The five-year facility will support businesses with a combination of capital, and grant-funded Technical Assistance, to help them navigate the crisis.

Business Partners International Zambia Limited, which has been actively supporting and funding SMEs in Zambia since 2014, has been selected as Investment Advisor for the Prospero Debt Facility on behalf of Prospero Zambia.

BPI Zambia’s Country Manager Alison Lungu says that since the pandemic was first reported in Zambia, there has been a general decline in economic activities in the country. He says the effects of the lost months during the lockdown and the resulting recession are evident in the sheer increase in the number of enquires and applications that BPI has been receiving for short-term bridging finance and working capital. “This relief funding is timely as it will assist Zambia SMEs to cope with the impact of the Covid-19 pandemic on the larger economy, with a particular focus on saving and maintaining jobs” says Mr. Lungu.

The Programme targets about 50 SMEs, with the application process expected to open in early June 2021. Business owners will receive funding of up to ZMK 1 million which will be paid out in local currency and will be granted a grace period of six months and will only start repaying the loan plus interest from the seventh month for up to 60 months. Interest will be concessional and indexed to the local commercial interbank lending rates, and business owners do not have to pay any upfront fees.

According to numerous studies, women entrepreneurs face unique challenges in accessing credit because most of them have limited access to formal education, do not own collateral, and society’s patriarchal nature. Therefore, the programme will give particular focus to women-led SMEs to reduce financial vulnerabilities women entrepreneurs face.

A Technical Assistance grant of up to ZMK 100,000 per investee will be advanced along with the relief funding to improve business processes. Technical Assistance provides value-added services for the entrepreneur in different aspects of their business, ranging from accounting support, problem-solving, and marketing plans. “I encourage all the qualifying SMEs, particularly women-owned businesses, to take advantage of this timely relief funding to help them survive this crisis” Mr. Lungu adds.

Prospero and BPI Zambia will prescreen potential beneficiaries to ensure that only businesses whose operations have been materially affected by the pandemic benefit from this facility. These businesses will have to demonstrate that they urgently require assistance to recover their operations.

Successful businesses will only use the funding to cover salaries, wages, rent, and other day-to-day operational costs; directors’ remuneration is limited to 20% of the loan amount. Additional working capital is also limited to 20% of the loan amount.

BPI Zambia recognizes the critical role that SMEs play in job creation, source of innovation, and increased productivity, leading to growth and development of the Zambian economy, and BPI Zambia are proud to be part of this very timely intervention.