The Bank of Zambia has reduced the Monetary Policy Rate (MPR) by 250 basis points, from 13.25% to 10.75%, following the Monetary Policy Committee meeting held on 28–29 September 2026. The reduction follows continued improvement in inflation, which declined to 6.1% in September 2026, within the Bank of Zambia’s 6–8% target range.

The reduction in the MPR is expected to contribute to lower borrowing costs across the financial sector as commercial banks adjust their lending rates. Bank of Zambia Governor Dr. Denny Kalyalya has encouraged financial institutions to pass the benefits of the lower policy rate on to consumers and businesses.

For Micro, Small and Medium Enterprises (MSMEs), the development presents an opportunity for improved access to affordable finance. High borrowing costs have historically constrained MSMEs seeking working capital, equipment financing and funding for business expansion. A reduction in lending rates could therefore stimulate greater demand for credit and encourage increased private-sector investment.

For the Zambia Credit Guarantee Scheme Limited (ZCGS), the reduction provides an opportunity to work more closely with Participating Financial Institutions to expand lending to viable MSMEs that may lack sufficient collateral. Through partial credit guarantees, ZCGS can help financial institutions mitigate credit risk while enabling more businesses to access financing.

The combination of lower interest rates and credit guarantees could further improve the affordability and accessibility of MSME financing and support enterprise growth, employment creation and Zambia’s broader economic development agenda.

The policy rate reduction also comes against an improving macroeconomic backdrop, with the Bank of Zambia reporting stronger private-sector credit growth and an improved economic outlook.