Credit Management Services Limited - Zambia : case study of a microfinance scheme

ffi ~~20786 STUDIES IN RURAL AND M-ICRO FINANCE! No.5 X4;; Credit Management ,Services Limited Zambia Case Study of a Microfinance Scheme David T. Musona p: Dorcas M. Mbozi 4 I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ May 1998 * C ['.~~~~~~~   CREDIT MANAGEMENT SERVICES LIMITED -ZAMBIA DAVID T. MUSONA DORCAS M. MBOZI MAY 1998  Studies published in this series are a joint effort between MFI networks in Africa and the Action Research task team of the World Bank. For information on this series contact: Shimwaayi Muntemba, Task Team Leader Tel: 202 458 7370 Fax: 202 473 8185 E-mail: SMuntemba@WorldBank.org For further information on the institution studied contact: Credit Management Services Limited Address : P.O. Box 80468, Kabwe, Zambia Telephone : 260-05-223467 Fax : 260-05-224859 The views expressed in this document are those of the authors and do not necessarily represent the opinions of the World Bank or any of its affiliated organizations. . .  The authors thank Ms. Tendai Ndangana and Mr. Derek Molver, Molver and Company, for reviewing the initial draft of this document. Funding for the project was provided by the Swiss Development Cooperation. Lawrence Mastri undertook the final editing. iii  FOREWORD The purpose of the World Bank's Action Research Program on Sustainable Rural and Microfinance Institutions in Africa is to strengthen local rural and microfinance institutions and contribute to mechanisms for supporting sustainable grassroots institutions that provide financial services to the poor. Action Research emphasizes capacity-building at the national level, by distilling and disseminating "best practices" and strengthening local networks of microfinance providers. The program adopts a participatory approach to capacity-building or strengthening. Leading rural and microfinance institutions, mainly NGOs, oversee the process through a core group, the "champion," one of which is normally the coordinating agency. In Phase I of the program, diagnostic studies of practices in two or three selected institutions are conducted and discussed at a national workshop. During this phase networks are also formed or strengthened. During Phase II, the network may opt for more in-depth studies, as in Phase I, or it may focus on one issue or delivery mechanism drawn from one or more institutions. These are discussed at a second national workshop. The program also supports a newsletter and periodic meetings of the network to encourage wider participation, dissemination of international best practices, sharing of experiences, development of guidelines, and policy dialogue with the government. Sub- regional workshops facilitate networking and information-sharing across national boundaries. At the end of three years, networks are encouraged to become self-supporting. This report on Credit Management Services Limited is one of a series of diagnostic studies being carried out in six countries. It is one of the many efforts by the rural and micro finance sector throughout Africa to reach poor producers normally ignored by the large, commercial institutions. Credit Management Services Limited is a subsidiary of Molver and Company, a private company that created CMS in response to donor demand for it to act as a credit intermediary to the rural poor. Credit Management Services Limited has adopted a double-pronged strategy to delivery of these services. First, it acts as an intermediary between donors and small agricultural producers, traders and fishing families, for a fee. Second, it borrows from the recently established Microbankers Trust to onlend to its clients. As a private company, CMS considers it necessary to ensure efficiency in the operation of its clients by providing them with training in business and financial management and providing them with legal services. The Action Research Program is funded by the Swiss Agency for Development and Cooperation and is managed in the Bank by a cross-sectoral team comprising Shimwaayi Muntemba (team leader, Environment), James Coates (Resident Representative, Mozambique), William Steel (Private Sector Finance), Carlos Cuevas (Sustainable Banking with the Poor), and Alexander Amuah (Consultant). The team has collaborated with a Bank-wide initiative "Sustainable Banking with the Poor," with a team of colleagues at headquarters and resident missions working on microenterprise issues, and with NGOs. In conducting this study the two consultants (financial economist and social scientist) worked closely with CMS staff and the Champion team of six MFIs. The multi-disciplinary and cross-sectoral nature of the management and research teams have brought strength to this grassroots-focused initiative. Cynthia Cook Thomas W. Allen Sector Manager Sector Manager Environment Private Sector Finance iv  A .z vswodddVuvo7 0,7 ........................-.UO!.2......0 oz ............................ .................... r s,uauwoM,, amn2