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    The role of microcredit in poverty reduction among rural households in Chibombo District
    (University of Lusaka, 2025) CHILESHE, Mary Nsofwa
    This study examines the impact of microcredit on poverty reduction in the low-income rural households of Chibombo, Zambia. Existing perspectives on microfinance's efficacy are conflicting, with advocates emphasizing its positive effects on income generation and financial stability, while critics warn of potential debt-related pitfalls. The research adopted a mixed method approach. A sample of 100 households was selected through stratified random sampling. For data collection the investigation deployed quantitative questionnaires and one-on-one interviews. Thematic analysis was employed to analyze qualitative data on repayment challenges, while quantitative data was analyzed using descriptive statistics and linear regression models. The results on the impact of microcredit on household income revealed significant correlations, with a moderate positive relationship between the frequency of microcredit utilization and household income (r = 0.575), and between the number of years utilizing microcredit and household income (r = 0.427), both statistically significant (p < 0.001). Concerning the impact on asset acquisition, correlations indicated a positive yet weak relationship (r = 0.353) between the frequency of microcredit utilization and the purchase of moveable assets, with a highly significant p-value of 0.001. The correlation with the number of years utilizing microcredit was 0.181, indicating a weaker positive relationship with a marginally significant p-value of 0.065. In exploring challenges during microcredit repayment, respondents identified financial knowledge gaps, weather-related uncertainties, fluctuating incomes, delayed salaries, and high-interest rates. Inadequate loan amounts were a significant factor influencing successful repayment, with challenges in fixed payment schedules and high-interest rates emphasizing the need for more flexible terms. The failure to repay microcredit had profound consequences, leading to accumulated debt, stress, and strained budgets. Loan officers from MFI X declared that the firm faced challenges in loan recovery, including uncooperative customers, a costly legal execution process, and issues with asset liquidity. Measures to minimize loan defaults included collateral pledging, third-party credit guarantees, credit ratings, and collection agencies. The findings provided a robust foundation for understanding the multifaceted dynamics affecting the effectiveness of microcredit. The study recommends for Microfinance institutions (MFIs) to tailor loans to specific customer needs, to integrate comprehensive financial education programs and to implement flexible repayment structures aligned with income cycles enhance borrower empowerment and resilience. MFIs should also explore innovative risk mitigation, like weather-indexed insurance, contributes to successful and sustainable microcredit utilization for MFIs. The study suggests future research avenues in microcredit: exploring innovative risk mitigation, assessing long-term impacts of financial education, and investigating technology's role in delivery. These recommendations aim to enhance program resilience, refine education approaches, and leverage technology for improved accessibility, efficiency, and transparency in microcredit practices.