Microfinance institutions in their present state are relatively new in the Zambian Microfinance markets. This research paper draws out a perspective that seeks to unveil the profound impact that microfinance loans on the livelihood of the people in Lusaka district of Lusaka Province.

Microfinance institution in Zambia were introduced to assist the low income entities so that they support and expand their small businesses and borrow individuals with loans in times of intermittent and unexpected cash flow requirements such as funerals, medicals costs, school fees and agriculture. Thus, microfinance institutions assist individuals and small-scale entrepreneurs meet cash requirement. It is therefore, believed that microfinance institution leads in reducing the high financial transactions costs of providing small loans. An increasing number of banks are exploring microfinance both as a profitable business opportunity and as a way of contributing positively to social and economic development thereby improving the livelihood of the people.

The study performed a regression analysis regarding overall impacts of microfinance (MF) loans on people’s livelihood. The independent variables included MF Loan Contraction, Age, Marital Status (MS), Highest Education Level (ED) and Number of Years in Business. The results showed that MF Loan contraction were statistically insignificant as they had a p-value that is greater than 5 percent (0.05), which means that MF does not have positive impact on people’s livelihood. The independent variables such as Age, Marital Status and Number of years in Business were similarly insignificant except Highest Education Level and Nature of Business were statistically significant. It deduced that the coefficients of the independent variables, which were insignificant, meant that, any effort that was made to get married, the years they spend in business as well as after contracting MF loan would not lead to positive impact on people’s livelihood. However, the two independent variables that were statistically significant meant that, in any effort that was made to acquire higher education and nature of the business they conducted would ultimately lead to positive impact on people’s livelihood.

However, based on the empirical evidence from the study, microfinance loans have negative impacts on the livelihood of the people. The major issue is that there are high interest rates charged by the Microfinance Institutions and in the survey, the respondents have complained about commercial banks having very high interest rates at 26 per cent but some MFIs are charging more than 100 per cent interest rates on the loans and people are still borrowing. It is a challenge for the farmers, Small, and Medium Enterprises to grow their businesses due to high interest rates. However, 86 percent of the respondents stated that interest rates charged were not favorable to sustain their businesses, and that led some of the participants to borrow from more than one MFIs to keep going and this in itself contributed to low income levels resulting from continued indebtedness and depleted profits. The respondents were asked if the loan they contracted was helpful in their livelihood, out of the valid respondents of 100, 59 percent indicated that it never boosted their business and 41 percent indicated that it was helpful because it boosted their business. It was against that background that microfinance loans has not the impacted livelihood of the people as their standards of living has remained miserable due increased suffering with harsh repayment conditions and high death rates among the people.

Therefore, actionable policy recommendations are presented to address some of pertinent challenges in which SMEs and farmers are facing.

Microfinance institutions in their present state are relatively new in the Zambian Microfinance markets. This research paper draws out a perspective that seeks to unveil the profound impact that microfinance loans on the livelihood of the people in Lusaka district of Lusaka Province.

Microfinance institution in Zambia were introduced to assist the low income entities so that they support and expand their small businesses and borrow individuals with loans in times of intermittent and unexpected cash flow requirements such as funerals, medicals costs, school fees and agriculture. Thus, microfinance institutions assist individuals and small-scale entrepreneurs meet cash requirement. It is therefore, believed that microfinance institution leads in reducing the high financial transactions costs of providing small loans. An increasing number of banks are exploring microfinance both as a profitable business opportunity and as a way of contributing positively to social and economic development thereby improving the livelihood of the people.

The study performed a regression analysis regarding overall impacts of microfinance (MF) loans on people’s livelihood. The independent variables included MF Loan Contraction, Age, Marital Status (MS), Highest Education Level (ED) and Number of Years in Business. The results showed that MF Loan contraction were statistically insignificant as they had a p-value that is greater than 5 percent (0.05), which means that MF does not have positive impact on people’s livelihood. The independent variables such as Age, Marital Status and Number of years in Business were similarly insignificant except Highest Education Level and Nature of Business were statistically significant. It deduced that the coefficients of the independent variables, which were insignificant, meant that, any effort that was made to get married, the years they spend in business as well as after contracting MF loan would not lead to positive impact on people’s livelihood. However, the two independent variables that were statistically significant meant that, in any effort that was made to acquire higher education and nature of the business they conducted would ultimately lead to positive impact on people’s livelihood.

However, based on the empirical evidence from the study, microfinance loans have negative impacts on the livelihood of the people. The major issue is that there are high interest rates charged by the Microfinance Institutions and in the survey, the respondents have complained about commercial banks having very high interest rates at 26 per cent but some MFIs are charging more than 100 per cent interest rates on the loans and people are still borrowing. It is a challenge for the farmers, Small, and Medium Enterprises to grow their businesses due to high interest rates. However, 86 percent of the respondents stated that interest rates charged were not favorable to sustain their businesses, and that led some of the participants to borrow from more than one MFIs to keep going and this in itself contributed to low income levels resulting from continued indebtedness and depleted profits. The respondents were asked if the loan they contracted was helpful in their livelihood, out of the valid respondents of 100, 59 percent indicated that it never boosted their business and 41 percent indicated that it was helpful because it boosted their business. It was against that background that microfinance loans has not the impacted livelihood of the people as their standards of living has remained miserable due increased suffering with harsh repayment conditions and high death rates among the people.

Therefore, actionable policy recommendations are presented to address some of pertinent challenges in which SMEs and farmers are facing.