23/07/2025
Rethinking CDF: Asset-Based Financing Key to Unlocking Zambia’s Economic Potential
Date: 23 JULY 2026
By Simpasa Benaya
Lusaka, Zambia – The government’s bold move to increase the Constituency Development Fund (CDF) to millions of kwacha per constituency annually represents a potentially transformative economic intervention. However, experts and economic observers argue that the full impact of CDF on national development remains limited due to how the funds are currently administered.
Economic strategists are calling for a paradigm shift in the application of CDF from general-purpose disbursements and micro-loans to asset-based financing, which is proving to be more secure, productive, and sustainable.
From Consumption to Production
The current approach of offering loans in cash form to citizens, particularly youths and cooperatives, while well-intentioned, has shown limited long-term economic impact. Many recipients lack collateral, financial discipline, or access to proper business development services, resulting in high default rates and minimal returns.
By contrast, asset-based loans, where beneficiaries receive productive tools or equipment instead of cash, have demonstrated higher success rates in other emerging economies. In this model, the equipment or asset itself becomes the collateral, which reduces risk and promotes accountability. Such assets include farming implements, small-scale manufacturing machines, delivery motorcycles, tailoring equipment, and welding machines, among others.
Driving Key Sectors
Asset-based CDF loans can strategically support Zambia’s key economic sectors:
1. Agriculture – Financing irrigation systems, greenhouses, tractors, and other machinery can increase productivity, reduce poverty, and enhance food security.
2. Manufacturing – Small-scale industries can be catalyzed through equipment for metal fabrication, food processing, textile production, and other light manufacturing ventures.
3. Technology – CDF can promote digital entrepreneurship by financing computers, internet access setups, and technical training, especially for youths.
4. Transport and Logistics – Equipment loans for delivery motorcycles or small trucks can expand informal sector logistics, support e-commerce, and create employment.
Challenges with Traditional Collateral
One of the major hindrances to productive borrowing in Zambia is the over-reliance on traditional collateral such as house title deeds, which many potential entrepreneurs do not possess. This model excludes the majority and contributes to Zambia’s high levels of financial exclusion. Equipment-based lending, by contrast, democratizes access to credit and brings more Zambians into the productive economy.
Call to Financial Institutions and Policy Makers
Zambian banks, microfinance institutions, and CDF managers are being urged to collaborate in developing structured equipment loan schemes within the CDF framework. These would involve:
• Procurement partnerships with local suppliers and manufacturers
• Training and mentorship for beneficiaries
• Clear asset recovery mechanisms in case of default
Such an approach is not only more sustainable but also more inclusive. It enables even unbanked citizens to become economically active and independent without needing traditional collateral.
Conclusion: A New Direction for Economic Growth
With over K28.3 million allocated to each constituency annually, CDF has the potential to be a cornerstone of Zambia’s inclusive economic growth strategy. But to achieve this, the nation must transition from a consumption-based to a production-driven model, anchored on asset financing.
As Zambia continues to seek homegrown economic solutions, equipment-backed financing through CDF stands out as a practical, scalable, and high-impact policy direction.
