Who regulates lending in Zambia

The answer to who regulates lending in Zambia depends entirely on what kind of lending you’re doing. Zambia operates under a tiered regulatory system that separates financial institutions by their activities, capital requirements, and the level of risk they pose to the financial system. 

Understanding this distinction matters because operating under the wrong regulatory framework, or worse, without proper licensing at all, can shut down your lending business faster than you can say “non-performing loan.”

The Bank of Zambia (BoZ)

The Bank of Zambia, established under the Constitution, serves as the primary regulatory authority for the country’s financial services sector. The Bank of Zambia Act of 2022 came into operation on August 11, 2023, and formally established the Monetary Policy Committee and the Financial Stability Committee. The central bank administers the Banking and Financial Services Act of 2017, which provides the legal framework for banks, microfinance institutions, and other financial service providers.

As of 2022, the banking sector consisted of 17 commercial banks, with five banks accounting for 65% of total sector assets and deposits. By the end of 2022, the total asset base of the entire banking sector stood at K196 billion, primarily funded by deposit liabilities of K147 billion. This concentration means the Bank of Zambia focuses significant regulatory attention on a relatively small number of institutions that carry most of the systemic risk.

As the country’s central bank, it enforces the Banking and Financial Services Act (BFSA), which gives it the power to license, monitor, and regulate commercial banks, microfinance institutions, and other non-bank financial institutions. 

For lenders, this means BoZ directly influences how lending businesses operate. Every financial institution must apply for a license, maintain adequate capital, submit regular reports, and meet conduct standards. BoZ also issues prudential guidelines that determine how much lenders can charge, what they must disclose, and how they should manage borrower information.

In a market where interest rates are among the highest in the region (bank lending rates averaged 29.1% APR as of January 2025, according to CEIC data) BoZ plays an active role in enforcing transparency. Its Cost of Borrowing Regulations require lenders to disclose the annual percentage rate (APR) and include all fees in the total cost of credit. This policy aims to help borrowers understand what they’re signing up for, while ensuring lenders operate transparently.

Commercial banks

Commercial banks represent the most heavily regulated tier of lenders in Zambia. These institutions must meet a minimum capital requirement of K104 million for locally owned banks and K520 million for foreign owned banks to obtain a license from the Bank of Zambia under the Banking and Financial Services Act. The minimum capital requirement was revised and came into effect on January 30, 2012. Banks can accept deposits, issue credit cards, provide letters of credit, and engage in the full range of banking activities that most people associate with traditional financial institutions.

The banking sector remained highly profitable in 2022 with an average return on assets of 5%, while net non-performing loans remained at less than 0.5 percent of total loans. However, these headline numbers mask considerable variation across individual institutions, and banks face ongoing challenges related to their significant exposure to government securities.

Bank lending rates in Zambia averaged 29.12% per annum in January 2025, reflecting the high cost of credit in the market. This rate environment creates both opportunities and challenges for lenders. On one hand, margins can be substantial. On the other, high rates limit the pool of creditworthy borrowers and increase default risk.

Microfinance Institutions

Microfinance institutions occupy a regulatory space between full-service banks and small-scale money lenders. The Bank of Zambia divides these institutions into three tiers based on their activities and capital levels.

Tier I deposit-taking MFIs require minimum regulatory capital of K250 million and can accept deposits, extend credit facilities, engage in linkage banking, and handle in-country money transfers. Tier II non-deposit taking MFIs must have paid-up capital above K25 million but cannot take deposits, while Tier III non-deposit taking MFIs with paid-up capital below K25 million do not require licensing by the Bank of Zambia.

As of 2022, there were 135 microfinance branches operating in Lusaka alone, addressing credit gaps between larger commercial enterprises and smaller business entities. As of April 2021, MFIs comprised 29% of all non-bank institutions in Zambia, with 35 registered institutions out of 121 total non-bank institutions.

The microfinance sector has grown substantially since the 2006 Banking and Financial Services (Microfinance) Regulations divided the sector according to deposit-taking and non-deposit-taking institutions. These regulations require microfinance institutions to meet minimum standards in governance, capital, internal control, reporting, and licensing. The Bank of Zambia prescribes a national interest rate formula that MFIs must use when determining their annual interest rates.

Deposit-taking MFIs must submit prudential reports monthly, while non-deposit-taking MFIs file quarterly reports, with regular inspections by the Bank of Zambia to ensure compliance with rules on reserves, capital adequacy, and liquidity.

Money lenders

Here’s where things get interesting. Not all lending in Zambia falls under the Bank of Zambia’s supervision. Money lenders operate under the Money Lenders Act (Chapter 398), and their primary licensing authority is not the central bank but rather the Magistrate’s Court and the Ministry of Finance.

The Money Lenders Act requires any person carrying on business as a money lender to obtain both a certificate from a court and a license from the Permanent Secretary of the Ministry of Finance. Licensing fees vary based on business size, with small businesses paying K3,000 annually and multinational companies paying K6,000 annually.

Unlike MFIs, the Money Lenders Act does not specify any minimum capital requirement, creating lower barriers to entry but also resulting in fewer permissible financial services and less comprehensive regulation. Money lenders focus almost exclusively on lending and cannot take deposits or offer most of the financial services that MFIs provide.

The Money Lenders Act empowers courts to review lending agreements to determine whether interest rates, fees, and other provisions are unreasonable, and to substitute what they determine to be fair provisions. An annual percentage rate of 48% is deemed by the statute to be unconscionable.

Operating as an unlicensed money lender carries serious consequences. Courts have held that money lenders not registered under the Money Lenders Act are conducting illegal business, and violators face potential fines, imprisonment, or both. Banks also refuse to work with unlicensed money lenders, meaning you cannot set up direct debit arrangements or even maintain a business bank account, which significantly hampers operations.

Also read: How direct debit or debit orders works in Zambia

The Securities and Exchange Commission’s role

Many microfinance institutions, particularly non-deposit-taking institutions, raise capital through capital market instruments regulated by the Securities and Exchange Commission, such as long-term notes. This creates an overlap where institutions must answer to multiple regulators, and when institutions face difficulties, resolution requires coordination between different regulatory bodies.

Before the 2022 revision of the Bank of Zambia Act, regulators had no formal obligation to cooperate, though they maintained a Memorandum of Understanding. The Financial Stability Committee now enables regulators to address regulatory gaps and assess industry-wide risks in a more coordinated manner.

Interest rate environment and monetary policy

The Bank of Zambia uses monetary policy to influence lending conditions across all regulated institutions. In February 2025, the Bank of Zambia raised its benchmark interest rate by 50 basis points to 14.5%, marking the highest level since 2016.

Annual inflation exceeded the central bank’s target range in May 2019, reaching 8.1%, and continued trending upward, stabilizing at 16.7% in January 2025. This inflationary pressure was driven by the worst drought the country has experienced in over a century. An 8% depreciation of the kwacha since the beginning of 2024 has kept borrowing costs elevated across the financial system.

Recent regulatory developments

In June 2024, the Bank of Zambia announced its intention to introduce the Bank of Zambia Currency Regulations, 2024, which aim to modernize and enhance the regulation of local currency operations within Zambia. The regulations seek to restrict domestic transactions to be conducted exclusively in Zambian kwacha, allowing only cross-border transactions to be carried out in foreign currencies.

These proposed regulations have sparked debate about whether the Bank of Zambia has the constitutional authority to regulate private commercial transactions beyond the banking and financial services sector. The Bank of Zambia Act of 2022 empowers the central bank to regulate the foreign exchange market where foreign currencies are bought or sold, but some argue that attempting to target specific commercial transactions that use foreign currency as consideration or medium of payment would exceed the Bank’s constitutional mandate.

What this means for Lenders

The practical implications of Zambia’s regulatory structure depend on your business model, target market, and growth ambitions. If you’re planning to accept deposits and offer a comprehensive suite of financial services, you’ll need to work through the Bank of Zambia’s licensing process for either a commercial bank or microfinance institution. This path requires substantial capital, robust governance structures, and ongoing compliance with prudential regulations.

If you’re focused purely on lending without accepting deposits and don’t plan to exceed certain capital thresholds, the money lending license route through the Zambia Ministry of Finance offers a more accessible entry point. However, you’ll face limitations on the services you can offer and the business relationships you can establish.

Regardless of which regulatory path you choose, operating without proper licensing is not an option. The courts have consistently upheld the illegality of unlicensed lending operations, and banks will refuse to work with unlicensed entities. For lenders with international operations or ambitions to scale, understanding how Zambia’s regulatory framework compares to other markets in the region can inform strategic decisions about market entry and expansion.

Also read: How to start a money lending business in Zambia

Lending in Zambia is a regulated path

Lending in Zambia is not a free-for-all market. Every institution that offers loans must operate within the legal boundaries set by the Bank of Zambia or the Ministry of Finance, and must report to licensed credit bureaus. For lenders, staying compliant is the only way to build trust, avoid penalties, and participate in a market that’s increasingly moving toward data-driven regulation and consumer protection.

If you’re building or expanding a lending business in Zambia, start by getting the regulatory pieces right. Lendsqr can help you launch, manage, and grow your lending operations in full compliance.