Delayed Supplier Payments Choking SME Growth – Economist

Lusaka – Economist Kelvin Chisanga has warned that delayed payments to suppliers are severely constraining the growth of small and medium enterprises (SMEs), compounding an already difficult operating environment marked by tight monetary conditions and a lending squeeze by commercial banks.

Chisanga said many SMEs are facing acute liquidity pressures as government arrears to suppliers remain outstanding, depriving businesses of the working capital required to sustain operations, pay workers and restock inputs. He noted that for most SMEs, timely payments are the primary source of cash flow, and prolonged delays are pushing otherwise viable businesses to the brink.

He explained that the situation has been worsened by elevated interest rates in the banking sector, which have made borrowing prohibitively expensive for small businesses. According to Chisanga, commercial banks have tightened lending standards in response to restrictive monetary policy, significantly reducing access to credit for SMEs that already lack sufficient collateral and strong balance sheets.

“The combination of delayed supplier payments and high interest rates has created a severe liquidity crunch in the SME ecosystem,” Chisanga said. “Even businesses with confirmed orders and contracts are struggling to survive because they cannot access affordable financing to bridge cash flow gaps.”

He argued that the current credit environment has limited SMEs’ capacity to expand, invest in productivity-enhancing equipment and create jobs, undermining their role as a key driver of economic growth and employment. Chisanga warned that without urgent intervention, the liquidity stress could translate into higher business closures and job losses.

The economist has called on government to urgently clear outstanding payments owed to suppliers as a first step toward restoring liquidity in the SME sector. He said settling arrears would immediately inject cash into the economy, stabilise small businesses and improve their creditworthiness with financial institutions.

In addition, Chisanga urged government to engage commercial banks and other financial institutions to unlock funding for SMEs through targeted credit lines, risk sharing mechanisms and more flexible lending terms. He said such measures would enhance the capacity of SMEs to withstand current economic pressures and position them for sustainable growth.

“SMEs are the backbone of the economy, but they cannot grow in an environment where cash flow is strangled and credit is inaccessible,” Chisanga said. “Clearing arrears and improving access to finance are critical to reviving confidence and supporting inclusive economic growth.”