Global Journal of Management and Business Research, B: Economics and Commerce, Volume 23 Issue 1

Benefits the SMEs Derive from Microfinance Institutions on Empowerment and Poverty Alleviation in Chazanga Compound, Lusaka, Zambia Mr. Francis Daka Author: Gideon Robert University, Provident House Next To Bank of Zambia Cairo Rd Lusaka, Zambia. e-mail: francisdaka13@gmail.com Abstract- The back bone of every economy is the private informal sector (SMEs) and most employment opportunities in Zambia largely focus on small and medium scale enterprises. Hence the contributions the sector makes to economic growth and development through job creation and can’t be overemphasized. However, SMEs were almost dismissed form the formal financial sector in Zambia. The small and medium scale enterprises face difficulties in accessing the financial opportunities, enterprise development skills, face unfavourable regulatory bottlenecks and inappropriate market structures and these therefore, poses serious restriction to their growth and development in the economy. When microfinance was properly harnessed, could make significant contributions to the economic growth and development because it promotes higher investments leading to economic empowerment which in turn promotes confidence, self-esteem, and build capabilities, particularly for the vulnerable majority. In other words, it creates access to productive capital for the poor and subsequently reduces poverty. This research was carried out to examine financial accessibility and the roles it plays to the SMEs sector in Chazanga compound of Lusaka district. The study objective was was to examine the benefits which SMEs derive from microfinancing and the roles it has played in the SMEs sector and the impact on poverty reduction in Lusaka district particularly Chazanga compound. The whole research covered fifty (50) small and medium entrepreneurs. The needed data for the study was generated from both primary and secondary sources. The research tools used to generate the primary data included informal, formal conversations and questionnaires. The secondary data was extracted from the books, articles, journals, presentation papers and news publication. Keywords: poverty alleviation, microfinance institutions (MFIs), loan portfolio, financial accessibility, small and medium entrepreneurs (SMEs). I. I ntroduction icrofinancing has becomes a credible and effective instrument for poverty alleviation and as such, its contributions to economic growth cannot be overemphasized. (Akinyemi, cited in Onuba 2008)The financing of small and medium scale enterprises are vital instruments for poverty alleviation in society. Therefore, SMEs play a crucial role in national building, and providing them with needed facilities would assist in bridging the gap between the rich and the poor. (Onuba 2008). The available information from the Registrar of patent and Companies department indicates that about 40% of the companies registered are micro, small and medium enterprises (SMEs). This target group has been identified as the catalyst for economic growth of the country as they are the major sources income and employment. The Ministry of Small and Medium Enterprises had in 2022 estimated that the Zambian private sector consists of approximately 70,000 registered Limited companies and 10,000 registered partnerships. Therefore, the need to provide secure source of financing for the sector can’t be overstressed. Since Zambia attained a meddle income status with per capita of at least US$1,000 by the year 2019, led by the vibrant private sector, within a decentralized democratic environment in which the country’s was growing the economy or increasing the market value of all the final goods and services produced in the country in (GDP) by 6-8% every year. The main goal of Zambia’s Growth and Poverty Reduction Strategy (ZGPRS) was to “sustainable economic growth, accelerated poverty reduction and the protection of the vulnerable and excluded within a decentralized, democratic environment. The intention was to eliminate the widespread poverty and growing income inequality, especially among the productive poor who constitute the majority of the working population”. The microfinance is that part of the financial sector which comprises of formal and informal financial institutions, small and large, that provide small sized financial services to all segments of the population, in rural and urban areas. These institutions cover a array ranging from indigenous rotating savings and credit associations, self-help groups, financial cooperatives, rural banks and commercial banks. The Zambian government supported these institutions in order to create the much needed jobs for the youths and improve their integration in the developing financial sector. The 2006 Nobel peace prize for Muhammed Yunus and the Grameen bank, stood as the proof that M microfinance had become the hottest idea for solving the problem of poverty. 13 Global Journal of Management and Business Research Volume XXIII Issue I Version I Year 2023 ( ) B © 2023 Global Journals