In recent years, Zambia has witnessed the rapid growth of informal moneylenders, commonly referred to as loan shacks. While they provide quick access to cash for individuals who are excluded from the formal banking sector, their operations have become highly exploitative. Many Zambian consumers now find themselves trapped in cycles of debt, paying back far more than they initially borrowed due to exorbitant interest rates, hidden charges, and unfair collateral conditions.
The rise of loan shacks can be attributed to several factors. A significant portion of Zambia’s population works in the informal sector, which makes it difficult to access traditional credit from banks and microfinance institutions. Loan shacks take advantage of this gap by offering “easy loans” without complicated paperwork, attracting desperate borrowers who need urgent money for school fees, medical expenses, or business capital. Unfortunately, these loans come with severe consequences. Because most of these lenders operate outside the regulatory framework of the Bank of Zambia, they are free to impose excessively high interest rates, short repayment periods, and heavy penalties for default. Some even withhold ATM cards, NRCs, or employment details as collateral, leaving borrowers with little control over their own finances.
The impact on consumers has been devastating. Teachers, nurses, marketeers, and small business owners often lose a significant portion of their monthly salaries to loan repayments, leaving little money for essential needs such as food, rent, and education. In many cases, borrowers fall into multiple loans just to service previous debts, creating a vicious cycle that undermines household stability and financial security. Beyond the individual level, this growing debt culture has wider social implications, including family stress, reduced productivity, and declining trust in financial services.
To address this growing crisis, the government needs to step in decisively. Regulation must be strengthened so that all lenders, including informal moneylenders, fall under the supervision of the Bank of Zambia. Interest rate caps should be set, and exploitative practices such as withholding personal documents must be outlawed. At the same time, consumer protection systems should be established to provide a platform for victims of predatory lending to seek redress. Complementing regulation, financial literacy campaigns are necessary to educate Zambians about the true costs of borrowing and to encourage more responsible financial choices.
Equally important is the promotion of affordable alternatives. Savings groups, cooperatives, and digital finance platforms can provide safer and cheaper sources of credit for ordinary citizens. Commercial banks should also be encouraged to design micro-loan products tailored to informal workers and low-income households. Stronger enforcement is essential to shut down unlicensed lending operations and prosecute moneylenders who exploit consumers through coercion or illegal rates.
If left unchecked, loan shacks will continue to impoverish Zambian households and erode confidence in the financial system. However, with the right mix of regulation, education, and affordable alternatives, borrowing can be transformed into a tool for empowerment rather than exploitation. Protecting consumers from these predatory lenders is not only a matter of financial justice but also a step toward building a fairer and more inclusive economy.