By Steven Mbangu
Zambia’s next development challenge is not simply how to finance enterprises, but how to mobilise the savings of its own citizens into productive capital and progressively turn them into owners of the economy. A further strategic implication is the Capitalisation of Home Grown Institutions that can multiply domestic capital.
The domestic-capital proposition also raises an important question about the role of government and other development actors.
If Zambia’s objective is to mobilise substantially more domestic capital for productive investment, then government should not necessarily limit its intervention to directly financing individual enterprises or creating another stand-alone MSME fund.
There is potentially a more powerful intervention:
Capitalise credible domestic institutions that can mobilise, aggregate, manage and deploy significantly larger pools of capital.
This distinction is important. A government allocation of K100 million to a programme that simply disburses grants or loans may provide immediate assistance to a defined number of enterprises. But a carefully structured capitalisation of a credible institution with the mandate, governance, systems and investment capacity to mobilise member contributions, citizen savings, private investment, diaspora capital and development-partner funding could potentially create a much larger and more sustainable pool of capital.
The public contribution would therefore become catalytic capital rather than merely distributive funding.
The objective should be:
Public capital to
→ Institutional capitalisation to
→ Citizen/member mobilisation to
→ Private capital mobilisation to
→ Enterprise investment to
→ Enterprise growth to
→ Returns to
→ Capital recycling to
→ Larger investment pool
This is a fundamentally different approach to public financing.
1. Government should increasingly fund capital multipliers, not only individual beneficiaries.
Zambia already recognises the importance of mechanisms that improve MSME access to finance.
The Zambia Credit Guarantee Scheme, for example, was established specifically to enhance MSME access to finance, while more recent initiatives such as the Small Business Growth Initiative have sought to use risk-sharing mechanisms to encourage financial institutions to lend to MSMEs.
The proposed domestic-capital architecture extends this principle one step further.
Instead of asking only:
“How much money can government put into MSMEs?” the policy question becomes:
“How much additional capital can government cause to flow into productive Zambian enterprises through every kwacha of public capital deployed?”
This introduces the concept of a capital-multiplier institution.
A credible institution could receive public or development-partner capitalisation and use that strengthened balance sheet, investment mandate and institutional credibility to mobilise additional capital from:
- members/citizens;
- cooperatives;
- Savings and Credit Cooperatives (SACCOs);
- private investors;
- pension and institutional investors;
- diaspora investors;
- development finance institutions; and
- strategic partners.
Government’s role would therefore be catalytic. It would help create the institutional capacity through which private and citizen capital can be mobilised at scale.
2. This provides a stronger rationale for capitalising institutions such as the Barotse Empowerment Trust Limited (BET) and the creation of its equivalent in every province of Zambia.
Therefore, this principle has particular relevance to institutions such as the Barotse Empowerment Trust (BET) and other credible Zambian development-oriented institutions that already possess organised membership, community networks, enterprise-development objectives or investment facilitation capacity.
Rather than viewing such institutions merely as organisations seeking funding for programmes, they should be developed into domestic-capital mobilisation and enterprise-development platforms.
For example, an institution such as BET could potentially operate across several interconnected functions:
Member mobilisation
→ Member savings/investment contributions
→ Institutional investment pool
→ Enterprise identification
→ EGS-UP assessment and graduation
→ Investment into qualifying enterprises
→ Enterprise growth
→ Returns
→ Capital recycling
This would allow an institution to become a bridge between citizen capital and investable enterprises.
The institution’s value to government and development partners would therefore not be measured only by how much funding it receives. It should increasingly be measured by:
– How much additional capital can it mobilise?
– How many enterprises can it graduate?
– How much productive investment can it generate?
– How many jobs and incomes can it create?
– How much capital can it recycle?
– How much citizen ownership can it facilitate?
That is a substantially stronger development proposition than simply requesting programme funding.
3. Public capital can be designed as catalytic institutional capital
Government and cooperating partners could therefore consider a new category of intervention:
Catalytic Institutional Capitalisation
Instead of providing funding solely for expenditure, capital could be provided to strengthen the institutional balance sheet and investment capacity of credible organisations.
Such capital would potentially support:
– investment funds;
– enterprise -development facilities;
– credit-enhancement mechanisms;
– first-loss or risk-sharing structures;
– investment-readiness programmes;
– technical-assistance facilities;
– project-preparation facilities;
– digital investment platforms;
– enterprise assessment systems; and
– co-investment vehicles.
The fundamental principle would be:
Public capital should be used, where appropriate, to unlock substantially larger pools of private and citizen capital. This is consistent with the broader policy direction already recognised in Zambia’s Investment, Trade and Business Development Act, which calls for catalysing and leveraging private savings—domestic and foreign—into business financing and strengthening capital markets and financial institutions. It is also consistent with the broader development-finance principle that scarce public resources can have greater impact when they are used to crowd-in additional private capital rather than attempting to finance the entire investment requirement themselves.
4. The case for BET and similar institutions should therefore be based on leverage.
The strongest argument for capitalising institutions such as BET should not be:
“Give us money so that we can finance businesses.”
It should be:
“Provide catalytic capital that enables us to mobilise substantially larger pools of member, citizen, private and development-partner capital and channel those resources into investment-ready Zambian enterprises.” That is a much more compelling proposition.
For example, a hypothetical capitalisation of:
K10 million public/development capital could be structured not simply as K10 million available for direct expenditure, but as institutional capital designed to support the mobilisation of:
K10 million public capital + K20 million member/citizen capital + K20 million private/development-partner capital = K50 million investment pool
The actual leverage ratio would depend entirely on the institution, structure, risk profile, regulation and investment performance.
The point is the architecture, not a predetermined multiplier.
Government would therefore be supporting the creation of a mechanism capable of progressively reducing dependence on government funding.
5. Capitalisation should be linked to measurable performance
Such support should not be unconditional.
Institutions receiving catalytic capital should be subject to clearly defined performance and governance requirements.
Potential indicators could include:
– Capital mobilisation – How much additional member, citizen and private capital has been mobilised for every kwacha of catalytic capital?
– Enterprise pipeline – How many enterprises have been assessed through EGS-UP?
– Enterprise graduation – How many enterprises have successfully graduated?
– Investment deployment – How much capital has actually reached investment-ready enterprises?
– Productivity – What improvements have occurred in enterprise productivity and revenues
– Employment- How many sustainable jobs have been created or supported?
– Citizen participation- How many citizens or members have become investors?
– Returns- What financial and economic returns have been generated?
– Capital recycling – How much capital has been returned to the investment pool for redeployment?
This converts public capitalisation from an expenditure programme into a performance-based development investment.
6. Government can therefore support the ecosystem without owning every enterprise
This is particularly important. The objective is not for government to become the owner and manager of thousands of enterprises. Government’s more strategic role can be to create the architecture within which citizens, institutions and private investors can finance those enterprises.
The model becomes:
Government
→ provides catalytic capital, policy support, guarantees and enabling regulation.
Institutions such as BET
→ mobilise members, prepare enterprises, manage investment programmes and connect capital to opportunities.
EGS-UP
→ identifies, strengthens, assesses and graduates enterprises.
Citizens and members
→ provide investment capital and participate in ownership.
Private investors and development partners
→ provide additional capital, expertise and market access.
Enterprises
→ generate production, employment, profits and economic value.
This creates a distributed development model rather than a government-dependent one.
7. Capitalising institutions can address the “missing middle”
One of the weaknesses in many development-finance systems is the gap between very small enterprises and large corporations.
Banks often struggle to finance enterprises that are too risky or too small for conventional commercial lending.
Government programmes may provide grants or relatively small loans.
Large institutional investors may require investment opportunities of significantly greater scale.
The result is a missing middle.
This is precisely where EGS-UP and capitalised domestic institutions can potentially intervene. An institution can aggregate smaller investment opportunities into professionally assessed portfolios and help enterprises move progressively from:
Micro → Small → Growth-stage → Investment-ready → Scalable → Institutional-investment-ready.
EGS-UP therefore becomes the enterprise graduation mechanism, while capitalised institutions become part of the financial bridge across the graduation process.
8. This should give government a stronger reason to support EGS-UP itself
The case for government support of EGS-UP consequently becomes much stronger. EGS-UP should not be viewed simply as another MSME capacity-building programme. It is potentially an enterprise-investment pipeline. Government support for EGS-UP would help create a larger pool of enterprises that are:
- formally organised;
- financially transparent;
- commercially viable;
- productivity-oriented;
- market-connected;
- investment-ready; and
- capable of absorbing growth capital.
That makes the system more attractive to citizen investors, domestic institutions, development-finance institutions and private investors.
The government therefore gains an additional return on its support: It is not simply supporting enterprises.
It is helping create investable enterprises that can absorb and multiply domestic capital.
9. A new partnership model: Government + Institutions + Citizens + EGS-UP
The architecture could therefore evolve into a four-way partnership:
Government
Catalytic capital + guarantees + policy + regulation + infrastructure
↓
Domestic institutions
Capital mobilisation + investment management + enterprise support
↓
EGS-UP
Enterprise identification + capability building + investment readiness + graduation
↓
Citizens and private investors
Investment capital + ownership + market participation
↓
Enterprises
Production + jobs + profits + productive assets
↓
Returns
Investor returns + reinvestment + expanded capital pool
This creates a much more sustainable system than one in which government repeatedly injects money into disconnected programmes.
10. The African Development Bank’s assessment strengthens the case
This proposition is particularly relevant given the African Development Bank’s recent assessment of Zambia’s financing challenge. The Bank’s 2025 Zambia Country Focus Report estimates Zambia’s financing requirement for structural transformation at about US$6.9 billion through 2030, with a critical financing gap of approximately US$5.4 billion, and calls for concerted mobilisation of domestic and external financing as well as innovative financing mechanisms.
That scale of financing need cannot realistically be addressed through government budget allocations alone.
Nor should Zambia assume that external capital will always be available on terms that maximise domestic ownership.
The country therefore needs institutions capable of mobilising multiple sources of capital and allocating them efficiently.
This strengthens the argument for capitalising credible domestic institutions that can serve as part of that mobilisation architecture.
11. The proposition therefore changes the meaning of “government support”
Government support should not be understood only as:
Government → money → beneficiary
It should increasingly become:
Government → catalytic capital → capable institution → citizen/private capital mobilisation → EGS-UP enterprise pipeline → productive investment → growth → returns → reinvestment
This is a fundamentally different model of public intervention.
- The first model consumes public resources.
- The second seeks to multiply public resources.
- The first creates beneficiaries.
- The second seeks to create investors, enterprises and owners.
- The first can create dependency.
- The second is designed to progressively create self-reinforcing domestic capital formation.
12. The ultimate objective: build institutions capable of financing Zambia’s own development
The long-term ambition should therefore be to build a network of credible Zambian institutions capable of performing complementary functions within the domestic-capital ecosystem.
Some may focus on Savings mobilisation; Others on Enterprise development; Others on:
Investment management; Others on Guarantees and risk-sharing; Others on Project preparation; Others on Sector-specific investment. And institutions such as BET could potentially occupy an important position at the intersection of:
- Membership mobilisation
- + enterprise development
- + investment facilitation
- + citizen ownership.
The objective would not be for every institution to do everything. The objective would be to create a connected national architecture in which different institutions perform complementary functions.
13. The complete EGS-UP and domestic-capital architecture
The proposition can now be expressed as a much larger cycle:
Government catalytic capital
↓
Capitalised domestic institutions
↓
Member and citizen mobilisation
↓
Savings aggregation
↓
Domestic investment pools
↓
EGS-UP enterprise identification
↓
Capability building
↓
Market access
↓
Investment readiness
↓
Enterprise graduation
↓
Growth capital
↓
Enterprise scale-up
↓
Higher productivity and incomes
↓
Profits and investment returns
↓
Citizen ownership
↓
Capital recycling
↓
Larger investment pools
↓
More enterprises
↓
More graduation
↓
More productive assets
↓
Broader domestic wealth creation
This is the point at which the proposition becomes considerably larger than an MSME financing model.
It becomes a potential national domestic-capital formation architecture.
14. The central proposition
The policy proposition can therefore be sharpened to:
Zambia should not only seek to increase the amount of capital available to MSMEs. It should build an institutional architecture capable of mobilising, aggregating and repeatedly recycling domestic capital into enterprises that can graduate, scale and generate wealth.
Government and development partners can play an important catalytic role by capitalising credible domestic institutions with the capacity to mobilise additional citizen, member, private and development-partner capital.
EGS-UP can provide the enterprise pipeline.
Domestic-capital institutions can provide the investment mechanism. Citizens can provide an increasing share of the capital and ownership.
Government can provide catalytic capital, guarantees, enabling policy and institutional support.
And successful enterprises can generate the returns and productive assets that allow the cycle to continue.
The ultimate transition is therefore:
Government funding → catalytic institutional capital
MSME support → enterprise graduation
Enterprise graduation → investment readiness
Citizen savings → domestic investment
Domestic investment → citizen ownership
Enterprise profits → capital recycling
Capital recycling → successive generations of enterprises
That is how Zambia can begin moving from an economy that repeatedly seeks capital from outside to one that increasingly forms, mobilises, circulates and compounds capital from within. And it provides a much stronger rationale for government, development-finance institutions and cooperating partners to support organisations such as BET—not simply as recipients of grants, but as potential capital-mobilisation and enterprise-development institutions capable of multiplying the impact of the capital entrusted to them.
Global Model Comparisons & Precedents
The proposed architecture is grounded in international blended finance, sovereign wealth/capital aggregation models, and cooperative economics.
1. Capital Multipliers & Catalytic Public Finance
Global Precedent: The “Cascade Principles” & Blended Finance (World Bank / IFC)
Mechanism: Using scarce public capital as first-loss protection, equity, or de-risking mechanisms to crowd in private institutional capital (pension funds, DFIs, diaspora).
Comparison: The paper’s formula (K10m \text{ public} \rightarrow K20m \text{ member} + K20m \text{ private} = K50m \text{ pool}) matches international blended finance structures.
2. Region-Based & Identity-Based Capital Mobilization
Global Precedent: Permodalan Nasional Berhad (PNB) – Malaysia
Mechanism: Established by the Malaysian government to aggregate savings of the indigenous Bumiputera population and invest them in strategic corporate assets, driving citizen ownership.
Comparison: Capitalizing local entities like Barotse Empowerment Trust Limited (BET) as provincial investment platforms directly mirrors PNB’s model of combining identity-based/regional social trust with structured capital recycling.
3. Aggregation of Co-ops and SACCOs
Global Precedent: Desjardins Group (Canada) & Mondragon Corporation (Spain)
Mechanism: Community financial cooperatives aggregate micro-savings into massive capital pools, which are then deployed to finance local commercial ventures and enterprise scale-ups.
Comparison: The paper suggests using provincial trusts/institutions to aggregate savings from cooperatives and SACCOs, bridging the gap between micro-finance and institutional-grade capital.
4. Enterprise Graduation Mechanisms
Global Precedent: BRAC Ultra-Poor Graduation Model (Bangladesh)
Mechanism: A structured, time-bound pathway that diagnoses constraints, provides skills, builds investment readiness, and graduates informal/micro-entrepreneurs into formal markets.
Comparison: The EGS-UP element adapts this concept specifically for commercial MSMEs moving from Micro \rightarrow Small \rightarrow Scalable \rightarrow Institutional Investment-Ready.
