The Effects Of Interest Regulations On Sustainability Of Microfinance Institutions In Zimbabwe

Author

Kudangirana Charmaine

Title

The Effects Of Interest Regulations On Sustainability Of Microfinance Institutions In Zimbabwe

Abstract

Microfinance institutions have become an integral part of the Zimbabwean economy by providing financial services to low-income households and the poor. They have been recognized for their role in poverty alleviation since the 1990s. However, policymakers are concerned about the relatively high interest rates charged by MFIs, which range from 20% to 30%. This has raised questions about how MFIs can fulfill their social mandate while charging high interest rates. The aim of the study is to investigate the effects of interest rate regulation on the sustainability of MFIs in Zimbabwe. The study uses the liquidity preference theory and a cross-sectional descriptive survey research design. The target population is one MFIs operating in Zimbabwe. The study collects primary data through questionnaires and secondary data through a survey sheet. Pretesting is done to ensure the questionnaire's reliability and validity. The study uses Statistical Package for Social Sciences (SPSS) to analyze the data. The study finds that changes in interest rates by the monetary authorities affect the sustainability of MFIs. The study finds a positive and statistically significant relationship between interest rates and the sustainability of MFIs. Decreasing the lending rate reduces the return on asset (ROA), which deters the sustainability of MFIs. Therefore, the government and policymakers should develop better interest rate policies that will promote the sustainability of MFIs.

Date

June 2023

Publisher

BUSE

Keywords

Bank

Interest Rate

Asset

Supervisor

N/A