Graduate School of Business

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Browsing Graduate School of Business by Author "Chikweti, Henry Lukama"

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    Interest rate model for short-term consumer credit in Zambia.
    (The University of Zambia, 2024) Chikweti, Henry Lukama
    In a bid to change the principal design of short term consumer credit pricing to address the adverse effects of high interest rates while promoting the positive attributes that continued to drive demand, this concurrent mixed methods study weaves together a multidisciplinary theoretical Interest Rate Model which addresses the asymmetry of information problem as the major cost driver. The study focuses on establishing the suitability, acceptability and feasibility of the aforementioned theoretical model considering that previous studies have not satisfactorily addressed the high cost nature of short term consumer credit such as payday loans. Previous studies have either only highlighted the matter or proposed rigid regulatory measures which lenders and borrowers conspire to avoid, suggesting inappropriate suitability, acceptability and feasibility considerations with regards to key stakeholders. The study using the Detailed Action Research Model and a population of more than eight thousand (8000) consumers, employers and merchants as key stakeholders conducted hypothesis testing based on the suppositions developed from the personal reputation conceptual framework and short term consumer credit literature. A sample size of 367 was gotten based on a 50% response distribution. Content analysis based on meaning units from in-depth interviews were used for the qualitative part. Analysis was conducted using Google Forms Analytics, Advanced Microsoft Excel Statistics Analysis Package (AMESAP) and N vivo. The hypothesis tests amongst individual consumers was about 87.5% on the suitability centric hypothesis and 100% on both acceptability and feasibility centric hypothesis. The semantic and thematic analysis from in-depth interviews with more than 40 merchants and employers as key stakeholders indicated an average 80% suitability and acceptability, and up to 90% for feasibility. The results suggest that the theoretical model would be suitable, acceptable and feasible. Therefore, the study advances a way to address the adverse effects on society of high cost short term consumer credit such as perpetual household financial distress, poor productivity from a financially stressed workforce for employers and liquidity constraints for merchant.
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    Risk-return trade off and loan default consideration in lending decisions: a case study of whence financial services.
    (The University of Zambia, 2020) Chikweti, Henry Lukama
    In a bid to construct a decision-making model to remedy the contradictions encountered in lending decisions, the study explored the dysfunctionality caused by risk-return and loans default considerations in lending decisions. Whence Financial Services, a microfinance institution was selected as a case study on the basis of being a good representative of the type of institutions that have exploited the niche under review in terms of size, capacity and range of services offered. Documentary review, survey questionnaire, in-depth interviews and a workshop were used to collect data for the study. Through analysis of this data, the study found that the dysfunctionality was primarily due to risk considerations and the risk was mainly due to information asymmetry between lenders and borrowers. Therefore, the decision-making model was constructed through establishment of a series of actions to be taken before a lending institution settles for guidelines to inform lending decisions, subject to the information asymmetry challenge. The model ensures the risk is managed through weaving together risk management measures to deal with the information asymmetry. The study established that the risk of default was at about 36% and this was way too high compared to the 2% residual risk internationally accepted for microfinance institutions. Therefore, in order to reduce this risk to acceptable levels, the Government and the central Bank of Zambia (BoZ) should take keen interest in local microfinance start-ups which usually start out operations using the money lenders certificate and support them through regulation and constant monitoring. This would greatly help in managing their risk exposure which is core to the dysfunctionality under review which continues to adversely affect the entire finance industry through moral hazard, adverse selection and excessive indebtedness. This is because such a development would increase customer and other stakeholder confidence in the microfinance institutions and this in turn would be vital as it would enable microfinance institutions to collaborate with other stakeholders, a development central to resolving the information asymmetry constraint. Keywords: Risk, Loans default, Microfinance, moral hazard, adverse selection, excessive indebtedness and information asymmetry.