Investigating the Effect of Alternative Financing on the Performance of Micro, Small and Medium Enterprises in Zambia (MSME): A Case of Lusaka District

Elizabeth Nyirenda and Dr. Yohane Romeo
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Elizabeth Nyirenda: Graduate School of Business, University of Zambia
Dr. Yohane Romeo: University of Zambia

African Journal of Commercial Studies, 2026, vol. 7, issue 1

Abstract: Micro, Small, and Medium Enterprises (MSMEs) are vital to Zambia's economic growth, especially in urban centers such as Lusaka. According to the Zambia National Statistical Agency (ZNSA), MSMEs account for over 97% of all businesses in Zambia and contribute approximately 30% to the country’s Gross Domestic Product (GDP). These enterprises are instrumental in driving job creation, with the World Bank estimating that they provide around 70% of employment opportunities in the private sector. This study aims to investigate the effectiveness of alternative financing mechanisms for Micro, Small, and Medium Enterprises (MSMEs) in Zambia, with a focus on improving their access to capital and mitigating the challenges they face in traditional financing channels. The study adopted a mixed-methods approach employing both qualitative and quantitative research designs. Using purposive sampling, data were collected from 1,663 registered SMEs in Lusaka District through questionnaires and interview schedules. The findings indicate that 76.4% of SME leaders facing borrowing constraints from traditional banks seek alternative finance options. Additionally, 62.5% of respondents viewed alternative finance as a useful external funding source, while 80.4% indicated that alternative finance supports successful capital raising. However, 64% of SMEs lack adequate knowledge and skills to effectively utilize alternative financing mechanisms. The study concludes that effective alternative financing positively influences SME performance, though challenges such as financial illiteracy, regulatory constraints, cultural attitudes, and limited technological capacity hinder widespread adoption.

Keywords: Alternative Finance; Financial Technology; Micro; Small and Medium Enterprises (search for similar items in EconPapers)
JEL-codes: G21 G23 L26 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:cwk:ajocsk:2026-08

DOI: 10.59413/ajocs/v7.i1.8

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