Critical success factors for microfinance institutions in Zambia : evidence from finance and social performance analysis

Nyikosa, Mayiji Joseph (2016-12)

Thesis

ENGLISH ABSTRACT : Microfinance institutions (MFIs) have played an important role in the economic growth of Zambia, however most MFIs have now become commercialised and benefit less from donor funds than previously. The scarcity of donor funds, unsustainable business practices, and rapid and increased competition amongst MFIs has made their survival a challenge, and there is now a high rate of inactive MFIs and very few recent success stories. The objectives of this study were to determine the financial and social performance factors that are critical to the success of MFIs in Zambia; to prioritise the level of importance of these factors; and to identify strategies for improving the financial and social performances of MFIs. The study will aid policy makers with policy formulations and MFIs with decision-making towards improving financial and social performance. A sample of 21 MFIs from the targeted population of 37 MFIs registered with the Central Bank of Zambia (BoZ) under the tier I and tier II classifications was utilised in the study, representing 56.8% of the target population. Secondary data regarding the determinants of financial and social performance factors for a period from 1992 to 2014 was also used. A descriptive survey was used for both a qualitative and a quantitative analysis of the study. From the financial performance analysis on profitability, the Return on Equity (ROE) and Portfolio Yield were statistically significant factors and have a positive influence on the success of MFIs. The sustainability factors of Operational Self-Sufficiency (OSS) and Financial Self-Sufficiency (FSS) were statistically significant to MFIs’ success. In the case of Portfolio Quality, this is largely influenced by the portfolio at risk and loan repayment rate. Both the variables were statistically significant as success factors. In terms of efficiency and productivity, personnel productivity and loan officer productivity were statistically significant in influencing MFIs. Debt/equity and operating expenses were also statistically significant in influencing the financial management of MFIs as success factors. From a social performance analysis, worth of users and cost to users were statistically significant to the success of MFIs. The findings of the study further indicate that few MFIs in Zambia prioritise social performance. It is recommended that MFIs focus on the above identified performance factors to formulate plans, strategies and policies that directly enhance and influence asset quality.

AFRIKAANSE OPSOMMING : Microfinansiering instellings (MFI) het 'n belangrike rol gespeel in die ekonomiese groei van Zambie, maar die meeste MFI het nou gekommersialiseer word en tot voordeel van minder uit donateursfondse as voorheen. Die skaarste aan skenkergeld, onvolhoubare sakepraktyke, en 'n vinnige en groter mededinging onder MFI het hul oorlewing n uitdaging gemaak, en daar is nou 'n hoe koers van onaktiewe MFI en baie min onlangse suksesverhale. Die doelwitte van hierdie studie was om die finansiele en sosiale faktore wat noodsaaklik is vir die sukses van MFI in Zambie is bepaal; om te prioritiseer die vlak van belangrikheid van hierdie faktore; en om strategiee te identifiseer vir die verbetering van die finansiele en sosiale optredes van MFI. Die studie sal help beleidmakers beleid formulering en MFI met besluitneming te verbeter finansiele en sosiale prestasie. 'N Monster van 21 MFI van die geteikende bevolking van 37 MFI onder die vlak I en II toegeroep klassifikasie met die Sentrale Bank van Zambie (Boz) geregistreer is aangewend in die studie, wat 56,8% van die teikenpopulasie. Sekondere data met betrekking tot die determinante van finansiele en sosiale faktore vir 'n tydperk 1992-2014 is ook gebruik. 'n Beskrywende opname is gebruik vir 'n kwalitatiewe en 'n kwantitatiewe ontleding van die studie. Van die finansiele prestasie analise op winsgewendheid, die opbrengs op ekwiteit (ROE) en Portefeulje Opbrengs was statisties beduidende faktore en het 'n positiewe invloed op die sukses van MFI. Die volhoubaarheid faktore van Operasionele selfgenoegsaamheid (OSS) en Finansiele selfgenoegsaamheid (FSD) was statisties beduidend tot sukses MFI. In die geval van die portefeulje gehalte, is dit grootliks beïnvloed deur die portefeulje in gevaar en terugbetaling van die lening koers. Beide die veranderlikes statisties beduidende as suksesfaktore. In terme van doeltreffendheid en produktiwiteit, produktiwiteit personeel en produktiwiteit lening beampte was statisties beduidend beïnvloed MFI. Skuld / ekwiteit en bedryfsuitgawes was ook statisties beduidend beïnvloed die finansiele bestuur van MFI as suksesfaktore. Uit 'n maatskaplike prestasie ontleding, die moeite werd om van die gebruikers en koste vir gebruikers was statisties beduidend tot die sukses van MFI. Die bevindinge van die studie dui ook dat min MFI in Zambie prioritiseer sosiale prestasie. Dit word aanbeveel dat MFI fokus op die bogenoemde geïdentifiseer faktore om planne, strategiee en beleide wat direk te verbeter en invloed bategehalte formuleer.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/101346
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