FROM THE ZAMBIAN DEVELOPMENT SUPPORT FOUNDATION BOARD
It is always inspiring to start the New Year with a deep sense of reflection on the achievements and challenges of the previous year and always looking forward to the new chapter of the 10 months ahead of us.
Zambian Development Support Foundation would like to take this moment to thank all the supporters that have continued to see that our operations are a success and to thank the volunteers on the ground who continue to work tirelessly, and to thank the beneficiaries of our loans who have decided to be part of this developmental initiative. We commit to continue providing you with the support that will see the economic transformation of your communities and subsequently households.
To all stakeholders, it is important to know that our work and efforts will transform the communities, as can be seen already from our success stories, and we hope that we will continue working together in this year 2016 and beyond and hoping to see more of the donor visits so that we all share experiences and ideas as we progress.
LOAN DISBURSEMENT
As indicated in the previous report of 31st December 2014, the foundation had at that stage approved disbursement of medium loans payable in 24 weeks and these loan amounts range from ZK1, 500.00 to ZK2, 500.00. These loans were only made available to paid-up clients graduating from small loans of ZK450.00 and ZK1, 000.00 which had a repayment period of 13 weeks. Medium loans were disbursed to 5 clients with a total amount of ZK8, 500.00 in August 2014.
Of the 5 clients that obtained medium loans, 3 have fully paid back the ZK1,500.00 each obtained at an interest rate of 10% and the two other loans are still struggling to repay back.
[For the benefit of our overseas supporters, ZK1,000.00 was approximately $153.00 US Dollars or €131.00 Euro in January 2015, but by December 2015 (due to currency devaluation) was only worth approximately $90.00 US Dollars or €82.00 Euro.]
A total amount of ZK19,450.00 Kwacha was given out during the year 2015 as small loans of ZK450.00 and ZK1,000.00 Kwacha and of this ZK12,600.00 has been paid back leaving ZK6,850.00 still on the loans books and everyone is on track, except two which obtained medium loans in August 2014.
Further progress was made in the year 2015 to get into partnership with a local pastor (Pastor Francis) in a bid to access a loan from ZDSF so as to increase food production for the community which he serves and his local community school through acquiring of a new water tank that will see more water being pumped into his garden. At the moment, Pastor Francis is running a school for orphans and other impoverished children in Chipulukusu and as part of this scheme he is also feeding many of the children who come to school. With a new water tank, Pastor Francis hopes to greatly increase the number of children he can support. ZDSF would like to assist Pastor Francis to fund this endeavor.
Pastor Francis in his community garden with the crops used to feed his schoolchildren
SUCCESSES
The 32 clients of ZDSF who had benefitted from loans since the start of 2014 have included some the following businesses;
- As reported in the 2014 Annual Report, Rose Mulenga had a very small scale business making cement blocks, but due to lack of capital she could not make sufficient blocks to meet demand from some of her customers. She had three children and three grandchildren depending on her, and she was struggling to survive. With a loan of ZK1,000.00 from ZDSF in February 2014 she was able to buy more raw materials and to expand her production. By September 2015, she was employing four young men to make the blocks and her business had expanded four fold. In August 2015 she obtained another loan amounting to ZK2,500.00 which she used together with some profits coming from her business to buy cement and sand and expand her business to another location. As she had hoped, she has now graduated from the ZDSF loan scheme and is able to continue making and selling blocks from her own resources and she is providing employment in the community.
- The story of Caroline Kadawele cannot be told without the intervention of ZDSF in uplifting her business and economic life. In 2014 Caroline Kadawele applied to ZDSF for a loan to grow her Chicken business, but the loan was not granted because she was in a group which was at that time defaulting. After those other members of her group (Enya Chama and Mary Bwalya as reported in the previous report) came back on track and completed paying back their loans, ZDFS approved her loan of ZK1,000.00 in May 2015. From keeping 30 chickens, Caroline was able to grow her business to now keeping 50 chickens which she is now able to sell in the community. As a result of her increased prosperity, she can now send her two young siblings, Moses Kadawele age 13 and Andrew Kadawele age 9, to school. By the end of 2015, Caroline had paid her loan in full and she has now applied to have bigger loan of at least ZK3,000.00 so as enable her to be able to buy blocks and build a chicken house which would be able to accommodate more chickens.
CHALLENGES
Defaulting loans
In the Annual Report of December 2014, it was reported that due to difficult personal circumstances, two loans had during that year gone into default, being those made to Mary Bwalya and to Enaya Chama. We reported at that time that revised terms had been agreed with them and that it was anticipated that the loans would be paid back in full over an extended period of time. We are pleased to report that during 2015 both loans were indeed paid back in full. As a result, all loans which had been made by the Foundation up until the end of 2014 have at this stage been paid back in full. We therefore have a 100% repayment record up to that time.
In 2015, two further loans went into default, but both are now back on track with revised repayment terms, and both borrowers are now financially stable. The two loans concerned are the following:
- In May 2013 Jedo Chibale, a married man with 5 children and 2 grandchildren to support, received a loan of ZK450 from ZDSF in order to expand his hardware business which was struggling and in danger of closing down. This loan enabled him to keep his business afloat and was paid back in full. He later went on to obtain another loan of ZK1,000.00 which saw his business expand and it became profitable. Jedo was also able to pay back that loan fully. Due to the increasing demand for bicycle spare parts, which is the biggest mode of transport in the community, Jedo further applied for and received the third loan of ZK2,500.00 in August 2014 which subsequently went into default. Due to unfortunate family circumstances and the loss of his mother, Jedo found himself with additional financial responsibilities and he was not able to pay back his loan within the agreed time. ZDSF engaged with Jedo on the importance of paying back the loan and agreed a revised way forward. An agreement was drafted which clearly stipulated a revised repayment plan and the timelines for repayment. This loan, which had been in default, is now being repaid in accordance with the revised terms and will shortly be paid in full. Jedo’s business is now stable and profitable and with the assistance of the Foundation he has been able to overcome both business difficulties and personal misfortune.
- Paul Mwansa had also received a loan of ZK2,500.00 in August 2014 in order to finance his shop which is in the mealie meal (corn meal) business. In October 2014 his loan fell into arrears after Paul had to start taking care of his brother’s medical bills when his ill brother came to live with Paul. Paul’s business also suffered as the currency crisis caused a sharp increase in the wholesale price of the mealie meal which Paul sells, making it difficult for him to continue. Again, after active engagement by members of the Foundation a revised repayment schedule was agreed in September 2015 and Paul’s loan is now being paid back faithfully in accordance with that revised schedule. This was done through a signing of the new contract which clearly states the obligations to complete paying back the loan.
Administration
ZDSF is run on a voluntary basis by the board of Directors and when it was formed two of the board members were stationed in Ndola where the loans are being made. During the course of 2015, both of these board members relocated to other towns far away from Ndola and this left the administration of the project to be coordinated by one board member, Voster Tembo, from Lusaka, which is about 380 kilometres away from Ndola. As a result, and despite periodic visits by Voster Tembo to Ndola during the year, administration was difficult and slow for much of 2015 and this led to a reduction in the amount of work which could be done on the ground compared with 2014. However, in January 2016, one of the board members who had been relocated away from Ndola, (Waveson Hamuchankwi) will be moving back to Ndola and he will take up much of the administration in Ndola again. It is anticipated that the administration of the project in the year 2016 will be much improved as a result and we are looking forward to substantially increasing our lending activities (funding permitting) in the coming year.
Office space
ZDSF has been operating without office space. All local administration is carried out from the home of a volunteer in the community in Chipulukusu, Ndola or, at board level, from the homes of the board members. Whereas this was preferred by the Foundation in order to save incurring administration expenses, it did present other difficulties. Government and official bodies in Zambia frequently require that any foundation/ NGO should have an official physical office address for the purposes of accessing services or obtaining benefits. With an official office, it would improve the profile and ability of the Foundation to expand its activities and in particular it would facilitate;
- Easier inspection by government bodies.
- Easier to obtain tax incentives and rebates from the Government – especially for the purposes of importations and receipt of donations from outside the country.
- Easier to enter into partnerships with other community based initiatives.
- Making the administration of the project, and collection of loan repayments easier.
In order to resolve this difficulty, a forty foot steel shipping container has been donated by Irish supporters and friends of the ZDSF and is underway for delivery to Chipulukusu, Ndola in the spring of 2016, for the purpose of being used as an official office. In partnership with Graceland School in Pamodzi, this container will also serve as a community library to increase literacy in the community. Office furniture and books for the library have also been donated by the Irish supporters and will arrive in the container.
It is hoped that by the end of April, the container will be in Zambia and sited in the community where ZDSF operates, to be opened as an office for ZDSF and also a community library.
Currency Devaluation in Zambia
With the increasing loss in value of Copper on the international market, Zambia has seen its currency, the Kwacha, losing more than a third of its value to major international currencies. This has been coupled with internal financial turmoil, increasing electricity and fuel tariffs, continued power outages and increasing inflation. All of this has resulted in an increased cost of doing business due to increased prices for commodities.
ZDSF has not been spared from the national problems and its reserves in Kwacha and the value of loan repayments have lost significant value in the past year. The loans of medium value (2,500.00 ZK) which were worth €327.00 Euro or $382.00 US Dollars in January 2015, were only worth €205.00 Euro or $225.00 US Dollars in December 2015. As a result, even with 100% repayment of loans made, the Foundation’s funds are seriously depleted in value. While international currency fluctuations do not have a direct effect in the local economy, inflation is high and the Kwacha is steadily losing its purchasing power. In the coming months, it is anticipated that the Foundation’s funds will continue to devalue. Further external funding is therefore urgently required.
ZDSF, with the support of its partners, has decided to retain donations which are raised overseas in a Euro account in Ireland which will only be transferred to ZDSF once the funds are ready to be disbursed to borrowers. This will reduce the rate at which the money in the bank will lose value before it is given out. This will be piloted in the coming months and will be periodically reviewed to ensure that this is the best way to go in preserving our resources.
Finances
Pericles Alumni Association of Elon University, North Carolina of the United States of America and donors from the Republic of Ireland continued providing finances to the foundation and during the calendar of 2015 a target to raise $30,000.00 by the end of August 2015 was set. However, this target was not met and so we continue to appeal to our donors and supporters for more funds.
As reported in the 2014 Annual Report, the Foundation is prohibited by Zambian law from taking deposits and so future growth in the size of the fund available for lending will depend entirely on the generosity of our supporters and friends and this is critical for the sustainability of the foundation.
In addition to financial donations, the Foundation is to receive a donation of bicycles and sewing machines from the Irish supporters who are supplying the shipping container in 2016. These items will also be allocated to people who are seeking to establish or grow businesses and will be used for income generating activities to be designed and approved by the board in a similar manner as money loans.
GOALS FOR 2016
The past year has again shown that the ZDSF method of advancing small micro-finance loans is effective in empowering people to start their own businesses, to work for themselves and to lift them and their families out of poverty. The Foundation has lifted 32 individuals and their families out of poverty. It is the immediate goal of ZDSF to now expand its operations to include;
- Having its own office space in the shipping container.
- Getting into partnerships with similar or complimentary organisations and NGOs with a shared vision.
- Open and run a community library.
- Make loans to more families – so as to bring relief from poverty to a greater number of people.
- Make greater loan amounts – so as to enable the fund to support medium sized businesses which require greater start-up capital than the small business ventures which have been so far supported.
- Expand the project to other communities
- Provide training in financial management to potential and beneficiary clients to encourage proper financial planning of businesses, structured book-keeping and an appreciation of the core economics of a successful business.
- Provide training in skills development and entrepreneurship for youths and women.
- To achieve a more robust and efficient management system in order to accelerate the lending and recovery process so as to make better use of the funds available.
- Most importantly, more finances are needed with the support of our external donors.
VISION
The Foundation envisions being among the major micro-finance institutions within and outside Ndola in the Copperbelt region of Zambia in the provision of financial services to low income groups within three years. The Foundation is committed to recovering loans in full from its clients. The Foundation is also committed to meeting its obligations to its lifeline donors of continuing to report on the progress of the project.
GOVERNANCE
The retention rate of Board of Directors is at 100%. The continuity of leadership ensures institutional stability, thereby decreasing staff needed to manage the project and reducing on administrative costs. The organization has operated at all times within the laws of Zambia.
In September 2015, the organization received a donation of a mini laptop and a camera from Irish donors for administrative use. Pericles Alumni Association of Elon University, North Carolina of the United States of America, has committed to provide funding to ZDSF for operational costs.
CONCLUSION
ZDSF would like to grow both institutionally and financially and continue to be accountable to its donors. The board of directors believes that the immediate measures that have been decided upon in realigning the management and administration system will be of great help to the foundation. Also, a commitment has been made to issue a detailed report twice a year on the project.
There is great need for access to financial capital for business purposes in Zambia, which in the very short term reduces poverty and permanently improves the lives of target groups. Through concerted effort of ourselves, the community and our donors, we hope to see more communities in Zambia come out of economic poverty. We still urgently require additional funds to increase our financial sustainability and expand our operations and access to these funds will largely determine the rate of success in the coming year.
Thank you for your support and looking forward to working with you in the coming year.
On behalf of the Board of Directors and ZDSF,
Voster Tembo
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