MWENYA, Emmanual Chintabamba2025-02-182025https://research.unilus.ac.zm/handle/123456789/360MASTER OF BUSINESS ADMINISTRATION IN FINANCE - ThesisThis research aimed to investigate the factors influencing loan defaults in microfinance institutions (MFIs) in Lusaka, Zambia, with a focus on Agora Microfinance, Unifi, and Foundation for International Community Assistance (FINCA). The study addressed the following objectives; analyzing the influence of interest rates on high default rates, assessing the association between loan appraisal and high default rates and investigating the link between loan payment training and high default rates in microfinance institutions. The research employed a descriptive cross-sectional design with a quantitative approach. This design was adopted as it measures the qualities of a specific population. The quantitative approach was ideal for the study due to its objectivity and ability to replicate the results on a sample of 89 respondents. The sample size was determined using Purposive sampling. Purposive sampling allows researchers to select participants who possess specific characteristics or experiences relevant to the research objectives. This method ensures that the sample adequately represents the target population of interest, enabling researchers to gain insights into a group within that population. Data was collected through questionnaires, focusing on both closed and open-ended questions. Statistical analysis was conducted using Microsoft Excel. Data was coded and interpretation was done using descriptive statistics and regression analysis to determine correlations between variables. Validity and reliability checks were done to ensure the accuracy and consistency of the data. Ethical considerations were upheld, ensuring participant confidentiality and informed consent. The results showed that an increase in the interest rate would lead to a noteworthy rise in non-performing loans. Furthermore, the findings showed that a negatively strong relationship existed between loan appraisal and defaults. An increase in enhanced loan appraisal techniques would reduce the likelihood of loan defaults. The findings also showed that client repayment training had no significant impact on loan defaults. In conclusion, the results showed that high interest rates have a huge bearing on loan defaults in Microfinance. The firms’ internal high operating costs and desire for high profitability were leading factors. Customers who are considered as high risk are the mostly likely to take up these loans as the low risk clients opt for less expensive credit. Furthermore, the study found that improved loan appraisal reduced loan defaults but not significantly. On the hand, loan payment training was not statistically significant and had no influence on loan defaults. Policy recommendations from the results of the study would include joint participation from regulators and microfinance sector on reducing the cost of operations of MFIs and inevitably high interest rates. In addition, MFIs should include as part of their credit policies constant reviews of their portfolios to ensure clients are not contracting unaffordable loans within and with other financial institutions.enThesis