CHAPTER 4: DATA PRESENTATION AND ANALYSIS

4.1 Introduction

The presentation of data and analysis of the study's findings are covered in this
chapter. The chapter opens with a response rate analysis and a presentation of
demographic data, and the second section uses SPSS 20 to analyze primary data to
address the research objectives from the first chapter. The chapter then presents the
study's descriptive statistics, with a focus on the mean and standard deviation as
measures of variation. To demonstrate the relationship between interest rates and
financial performance and to determine its nature and strength, the study offered
regression analysis and Pearson correlation analysis data.

4.2. Analysis of Response Rate

The response rate is calculated or obtained by dividing the number of disseminated

questionnaires by the number of returned questionnaires. According to Willman
(2010), results with a low response rate have sample bias, whereas those with a
significant response rate are free of bias. The response rate to questionnaires that were
issued is shown in the table below.

Table 4.1 Questionnaire Response Rate

Deposit Credit Subsidiar Microfinance Total Rate%

Taking Only y Owned Bank
MFIs MFIs Bank
Distributed 30 15 10 5 60 100%
Questionnaires
Returned 22 13 8 3 46 76.66%
Questionnaires
Unreturned 8 5 4 2 14 23.33%
Questionnaires

Source: Raw Data 21

Staff from branches in Gweru made up the study's sample size for the census survey.
Sixty (60) questionnaires were distributed to the participants, who worked as branch
managers, loan officers, loan clerks, and attaches. The survey participants completed
and returned 46 questionnaires in total, translating to a response rate of 76.66%.
According to Hart, Breman, and Sym (2010), a response rate of 60% or more is
necessary to generate a credible analysis from the data gathered. It can be concluded
from this that the response rate was excellent and within the acceptable range.

4.3 Assessment of Participants' Demographics

Years of employment (experience) and position within the MFI were included in the
investigation as demographic data to validate its findings.

4.3.1 Years Spent Working at MFI

Figure 4.1 Experience in the Sector

5%

20%

25%

50%

less than one year 1 to 3 years 3 to 7 years over 10 years

Source: primary data

22
Figure 4.1 shows that 25% of participants have worked in the MFI business for a
period of one to three years (1 to 3), 50% have worked in the industry for a period of
three to seven years (3 to 7), 20% have worked in the industry for more than seven
years, and 5% have worked in the industry for less than a year. The research reveals
that the bulk of respondents and those with an extensive understanding of how the
industry functions are those who have worked in the MFI sector for three to seven
years. After the establishment of the multicurrency system in 2009, the microfinance
sector in Zimbabwe has been operational for 12 years. The majority of those who
responded to the standardized questionnaire on loan rates and MFI sustainability are
thought to be well-versed in the industry and have more than three years of
experience. The knowledge or experience adds additional worth or dependability to
the study's conclusions.

4.3.2 Holding employment at the MFI

Table 4.2 below shows the position held in the institution by respondents

Table 4.2 responders' rank inside the MFIs

Frequency Percentage

Branch Manager 15 25.86%

Loans Officer 20 40%
Loans Clerk 12 20.68%
Attaché 11 18.97%
Total 58 100%

Source: primary data

The number of responders and each person's position within the organization is shown
in the table above. 25.86% of respondents work as branch managers, who are in
charge of making decisions and overseeing day-to-day operations at their particular
branches.

23
40% of those surveyed visit loan officers, who do credit checks and advise the
organization on whether to approve or deny a loan request based on the degree of risk
involved. 20.68% of the total belonged to loan clerks, whose duties include capturing,
processing, and record-keeping for paperwork. The remaining 18.97% goes to
employees who are enrolled in work-related learning. By requesting sources of
information from responders, the degree of information-gathering accuracy will be
less jeopardized.

4.3 Persisting Monthly Interest Rates for MFIs

Current market interest rates for microfinance organizations under various

proprietorship models are shown in the figure below.

Figure 4.2 Market Interest Rates

35%

30.00%
30%

25%

20% 18.50%

15%
15%
11%
10%
10% 9%
7.00% 7%
5%
5%

0%
Lowest rate Average Rate Highest rate

Local Private Owned MFIs Membership owned MFIs Subsidiary banks

Source: ZIMSTATS

The graph up top shows the current market interest rates for privately held, member-
owned, and affiliated bank microfinance institutions in the area. The lowest interest
rate offered on the market by locally owned and operated microfinance banks is 7%,
while their highest rate is 30%, with an average of 18.5%. The market rates for
subsidiary bank-owned microfinance organizations range from 7% to 11%, with an
average of 9%. 24
With an average interest rate of 10%, membership-owned microfinance has one of the
lowest market interest rates at 5% and the highest at 15%. each month.

4.4 Effect of Interest Rate Regulation on Financial Performance of MFIs.

The purpose of the study was to ascertain how interest rate control affected the
financial performance of MFIs. To get respondents' thoughts on this idea, the
researcher asked them five separate questions. The results are shown in the tables and
charts below:

4.4.1 Interest Rate Regulation and Interest Income

The following table displays respondents' views on how interest rate control and
interest income have affected them.

Table 4.3 Interest rate Regulation and Interest Income

Percentage Cumulative Percentage

Strongly Agree 15 15
Agree 12 27
Neutral 25 52
Disagree 20 72
Strongly Disagree 28 100
Total 100

Source: primary data

MFIs expand facilities primarily to boost interest income and, as a result, the
organization’s ultimate profitability. The purpose of the study was to determine
whether the interest income of MFIs increases as a result of interest rate regulation.
The results showed that 28% strongly disagree, 20% disagree, 25% were indifferent,
and 12% believe that interest income for MFIs has improved as a result of interest rate
control. This suggests that measures taken by the central bank, including interest rate
caps, have a detrimental influence on the profitability of MFIs.

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4.6.2 Interest Regulation and Profitability of MFIs

Microlending organizations aim to steadily improve their profitability. The survey's

goal was to determine whether rising interest rates have improved the profitability of
MFIs.

Figure 4.3 Interest regulation and profitability of MFIs

5%

15%
30%

50%

Strongly Disagree Disagree Neutral Agree

Source: primary data

The perspectives of respondents regarding how interest rate regulation affects the
profitability of MFIs are depicted in the above diagram. According to the study's
findings, just 5% of respondents agreed, 15% were neutral, 50% disagreed, and 30%
strongly disagreed that interest rate regulation increased the profitability of MFIs.
This means that when interest rates are reduced to the absolute minimum,
microfinance organizations will not be able to generate enough revenue to pay their
bills. The results of the above figure are also consistent with those of other
researchers' studies, such as Donor Brief 18 (2004), which discovered that interest
rate ceilings have an impact on the financial performance of MFIs in the USA.

Figure 4.4 Default rate and interest rate regulation

26
4.6.4 Interest Rate Regulation and Default Rate

45%
45%

40%

35%

30%
25%
25%
20%
20%

15%
10%
10%

5%

0%
Strongly Disagree Disagree Neutral Agree

Source: primary data

Loan default increases when the borrower is unable to make payments because of a
disability or unemployment or is unable to fulfill the loan's outstanding balance.
According to the study, 10% agree, 25% were neutral, 45% opposed, and 20%
strongly disagreed that interest rate regulation increased the rate of loan default. This
implies that lending rate regulation will reduce default rates since loans will be more
affordable.

4.6.5 Other MFIs charges and interest rate regulation

Data on participants' perceptions of other MFI fees and interest rate regulations were
shown in the figure below.

Figure 4.5 Other MFIs Fees

If lending interest rates are low, it is anticipated that MFI will raise other fees to make
up for the loss caused by the decline in interest income. The purpose of the study was
to determine whether other MFIs' fees had grown since bank regulations took effect.
According to the graph below, out of 40 respondents, 5% disagree, 53% agree, 12%
strongly disagree, and 30% strongly agree that additional MFI fees have increased as
a result of interest rate control.
 27

According to a study, this is accurate Strongly agree Disagree Strongly disagree with
Esipisu's 2003 study, which claims that ceilings can lead to less transparency
regarding borrowing prices since MFIs deal with interest rate caps by charging
additional fees for their services.

53%

12%
30%

5%

Agree Strongly Agree Disagree Strongly Disagree

Source: Primary Data

4.6.6 Interest Rate Regulation and Liquidity

Table 4.6 below shows the views of respondents on interest rate regulation and
liquidity of MFIs.

Table 4.4Liquidity and interest rate regulation

Percentage Cumulative Percentage

Strongly Agree 20 20
Agree 30 50
Neutral 20 70
Disagree 15 85
Strongly Disagree 15 100
Total 100
Source: primary data 28

The essential for MFIs is liquidity, which ensures that they can discharge any number
of loans to raise their return on assets, which is durability, and so boost their interest
revenue. According to the results of an investigation, 30% of people agree, 20%
disagree, 15% strongly disagree, and 20% strongly agree that interest rate control has
reduced the amount of liquidity or cash available for lending. According to the
findings in the table above, interest rate regulation and liquidity are positively
correlated.

4.8 Effect of Lending Interest Rate Regulation on Supply and Demand for
Credit.

The purpose of the study was to ascertain how interest rates affected both the supply
and demand for loans. To get respondents' perspectives on this point of perspective,
the author designed 4 distinct questions. The results are shown in the tables and charts
below.

4.8.1 Amount of current debtors and interest rate regulation

Table 4.6 show respondents’ opinions on several clients and interest rate
regulation.

15%
5%

30%

50%

Strongly agree Agree Disagree Strongly Disagree

Source: Primary Data

 29
MFI had numerous borrowers before bank controls, according to 15% strongly agree,
50% agree, 30% disagree, and 5% strongly disagree. This indicates that when the
central banks set ceilings, the MFI sector's participants will plan to leave the industry
and some will decrease their system infrastructure because it won't be profitable to
continue conducting business as usual.

4.7.2 Volume of authorized loans and Interest Rates regulation

The opinions of the participants on the number of loans authorized and interest rate
regulation are shown in the figure below.
Figure 4.7 volume of authorized loans and interest rates regulation

Strongly disagree 20%

Disagree 45%

Strongly agree 10%

Agree 25%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Sales

Source: Primary Data

The implication of this variable is that because the resources are more accessible and
affordable, interest rate control is anticipated to boost the number of loan requests.
According to the report's conclusions, 10% strongly agree, 25% agree, 45% disagree,
and 20% strongly disagree that the surge in the proportion of proven loans was caused
by interest rate restrictions. The findings indicate that MFIs will be hesitant to make
loans because doing so will not be financially advantageous when borrowing rates are
we

30
4.7.4 Number of New Borrowers and Interest Rate Regulation

Opinions of participants on the number of new borrowers and interest rate

regulation are shown in Table 4.8.

Percentage Cumulative Percentage

Strongly agree 5 5
Agree 20 25
Neutral 15 40
Disagree 50 90
Strongly disagree 10 100
Total 100

Source: Primary Data

The research also aims to determine regardless of whether interest rate control has an
impact on the proportion of incoming clients and borrowers. It was established that
20% agreed, 50% disagreed, 10% strongly disagreed, 15% were neutral, and 10%
strongly agreed that the number of new clients has expanded after interest rate
regulation. The findings in the table ahead demonstrate that the control of interest
rates has a direct impact on the volume of new debtors.

4.8. Micro financiers' financial performance factors

The report's goal was to identify the factors that influence micro financiers' financial
performance, and the findings showed that there are several ways to quantify financial
performance. The study's participants were questioned about the factors that they
believed affected the Gweru micro financiers' financial performance.

31
 Figure 4.8 Micro financiers' financial performance factors

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%
Portfolio quality Capital asset ratio Gearing Ratio Size of Mfis Market concetration

agree strongly agree neutral disagree Strongly disagree

Source: Primary Data

4.8.1 Portfolio quality

In terms of whether portfolio quality is a factor of performance, 60% agree, 80%

strongly agree, 45% are indifferent, 20% disagree, and 30% strongly disagree that
portfolio quality determines microfinance performance. The majority of participants
agreed that the performance of micro financiers can be gauged by the quality of their
portfolio. The administration must consequently focus on improving portfolio quality
and make wise judgments in this regard.

According to all interviewees, portfolio quality is one of the key factors influencing
performance. They claim that this is because portfolio quality affects an organization's
ability to distribute new or additional loans, which has an impact on its primary
objective.

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They continued by stating that portfolio quality displays non-performing loans
(NPLs), also known as loans with a principal amortization period (PAR) of more than
30 days, which have an immediate negative impact on the institution's capacity to
remain solvent and profitable. Four of the interviewees raise the problem of interest
rate constraints, which were implemented in 2021 by the RBZ and stipulated that
interest per month must not exceed 30%. If the portfolio composition is poor, micro-
enterprises would not be capable to meet their operational costs.

4.8.2 Capital Asset Ratio

According to the study, 45% highly agree, 80% agree, 10% disagree, 35% are
indifferent, and 30% strongly disagree that the capital asset ratio decides the
profitability of MFIs since it gauges the stability of the MFIs which affects the
financial performance if unanticipated losses rise. Five interviewees in all indicated
that capital asset ratios gauge a microfinance institution's success based on its capacity
to meet all of its responsibilities and debts as well as absorb unforeseen setbacks.
They claimed that when unanticipated losses occur, the capital asset ratio provides a
guarantee of Financial Performance. In support of this claim, Dietrich and WanZried
(2009) showed how the capital asset ratio affects the performance of credit
intermediaries. Additionally, Muriu (2011) provided evidence that well-capitalized
micro financiers are more adaptable in buffering possible shocks, lowering funding
costs.

4.8.3 Gearing Ratio

When asked whether the gearing ratio has any bearing on the financial success of
microfinance organizations, 90% of respondents strongly agreed and 70% agree that it
does. The remaining 50% were undecided, while 30% disagreed and 15% strongly
disagreed.  The majority of interviewees emphasized that the gearing ratio is often
alluded to as a predictor of financial performance since it reveals the microfinance
organization’s entire exposure, which in turn reveals its level of financial viability.

33
In support, Nelson (2011) said that the gearing ratio is a factor of financial
performance since it measures monetary strength, which improves the ability to fund
corporate activities. 

4.8.4 Magnitude of the company

70% highly agree, 60% agree that the size of the firm determines financial
performance, 25% are neutral, 10% are against this, and 25% strongly disagree that
the business's size causes business results. Cull et al (2007) argue that economies of
scale have a beneficial impact on the relationship between the size and monetary
efficiency of microfinanciers reinforced this. Most of the participants agreed that one
of the huge advantages of economies of scale and scope is lower costs, which help
microfinance firms increase their price competitiveness in international markets. In
addition, economies of scale produce higher returns on capital invested and give
micro financiers a foundation to expand. As a corporation expands in size, it hardens
and develops less subject to outside threats like acquisition attempt attempts. This is
one of the main advantages of economies of scale for industries because it helps the
firm's stock price and capacity to acquire further capital.

4.8.5Market concentration

Market concentration is found to be a significant predictor of financial performance,

with 80% strongly agreeing, 90% agreeing, 35% disagreeing, 205 disagreeing
severely, and 30% indifferent. Gajure and Pradham (2012) suggested that because
there is insufficient rivalry in a heavily concentrated market for financial services,
those that are already in place are especially lucrative.

4.8.6 Techniques to enhance leadership's financial performance

For an organization supplying credit, credit risk management is essential to regulate

the loan portfolio's quality, according to the majority of participants. They
emphasized the importance of credit risk management as a technique for managing
non-performing loans and for the survival of microfinanciers.

34
This was backed up by Sindani (2012), who emphasized that when credit risk
management systems are completely adopted, they can help microfinance
organizations prevent or limit the negative effects of credit risk and lower their rates
of non-performing loans.

Then, according to the remaining respondents, the majority of micro-lenders ability to

remain in business is solely dependent on their ability to raise money and collect loan
repayments from borrowers. Additionally, all of the participants indicated that
managing liquidity is one of the techniques used to boost financial performance since
it assures that there will be enough money to support the primary goal of
microfinance, which is to offer microcredits. Liquidity administration, they continued,
will implicitly gratify clients since it will make it possible to fund clients whenever a
need occurs without any delays due to the money that is made available by being
liquid. Additionally, they advised management to pay closer consideration to the
organization’s minimum levels of liquidity to avoid disappointing the financing wing.
Being liquid will encourage revenue expansion, which will improve efficiency and
financial performance.

Additionally, they all emphasized how crucial cost control management is because it
would have a direct influence on the proportion of operational efficiency. The
expense of an organization’s operations can be reduced over time by simplifying
them, which increases organizational revenues and ultimately increases financial
performance.  They said that exorbitant expenditures could cause the microfinancier
to fail, so it was necessary to cut them to make money. Five participants mentioned
that using the right plan of action when a crisis arises, management expertise, and
competency also help financial success.

4.9 Summary

Tables and graphs were used to display the investigation project conclusions on the
variables and factors influencing their financial performance that were examined. In
the following chapter, the study's executive summary, research findings, and
recommendations are presented.

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CHAPTER 5: SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS

5.1 Introduction
The goal of the research was to determine how interest rate regulation affected the
financial performance of microfinance firms in Zimbabwe. This study sought to
identify elements of lending interest rates that influence the financial performance of
MFIs. The chapter before this one examined study findings and how they related to
the literature review. This chapter summarizes the project by examining the overall
study and providing a summary of the findings, recommendations, and research from
the subject area.

5.2 Summary of the Study

A broad foundation on performance characteristics and factors impacting micro

financiers is provided in Chapter 1 of this investigation project. Microfinance has
been considered a social and financial tool for the poor populace that is monetarily
disenfranchised by the banking industry. Through women's empowerment, job
creation, sustainable growth, and poverty alleviation, microfinance has attempted to
lower the level of financial inclusion and bring in the social side. The chapter also
concentrated on the problem statement, the research objective, which was to assess
the financial performance of micro financiers in Zimbabwe, as well as the research
questions, the significance of the study, the report's underlying premises, its
delimitation and limitations, the definition of key terms, and its summary.

According to a review of the literature, many components of interest rate regulation,

such as bank interest rate restrictions, liquidity, and supply and demand for credit,
have an impact on the financial performance of MFIs. It concentrated on going over a
thorough summary of the literature written by other authors, including Ofeh and
Jeanne (2017), Alemayehu and Lemma (2014), Yenesew (2014), Muriu (2011), and
Neil (2012), to gain a thorough understanding of the factors influencing performance
and the factors determining financial performance. This study's primary goal was to
analyze how the cost leadership strategy affected the financial performance of MFIs
in Murang'a County.

36
The study found a favorable and scientifically significant association between cost
leadership strategy and MFI sustainability. The rejection of the null hypothesis
implies that cost leadership affects the viability of MFIs in Murang'a County. The
MFIs had a flexible loan payback schedule, utilized technologies like mobile banking,
and provide goods and services to a wide range of customers. Using the cost
leadership method, MFIs can gain a comparative edge by charging a reasonable price
for their goods, eventually achieving sustainability thanks to more customers.

Chapter 3 covers the methodology used to design and validate the qualitative survey
that served as the basis for the research project. The research design, research
population, sampling strategies, and research sample were all covered, along with data
collection methodologies, research instruments, data gathering methods, data analysis,
and data presentation and summary whereas, section 4 focused on presenting,
analyzing, and discussing the research's findings, which were collected through data
collecting using questionnaires and interviews. Data presentation and analysis were
aided by the use of tables, graphs, and explanatory comments.

5.3 Conclusion

Following are the conclusions reached using the data from the questionnaires and
regression analysis model:

 The analysis found that changes in lending rates made by the monetary
authorities had a significant impact on financial performance and that interest
rate control had an effect on how sustainable Zimbabwean MFIs were.
 According to the report, higher interest rates deter potential borrowers, who
turn to alternative formal or informal players, decreasing the MFI return on
asset and ultimately its viability.
 Central banks have the power to adjust lending interest rates, which has an
impact on the interest rates that everyone seeking to borrow money for
business investments must pay. MFIs can respond quickly to changes in
interest rate regulation and overall production.
 According to the investigation's findings, loan rates must be kept under
supervision for viable MFIs.
37
5.4 Recommendations
5.4.1 Establishment of Interest Rate Policies
Better lending rate policies should be developed by the monetary authority and other
policymakers to allow MFIs to be sustainable. Policies governing lending interest
rates that are detrimental to the sustainability of MFIs must be changed. Codified
interest rate rules should make sure that the cost of obtaining a loan from MFIs is
accessible for the majority of lenders. The government must take steps to oversee and
manage an inflation level because it tends to raise interest rates. The government must
also devise strategies to make our currency stronger in comparison to other
currencies. To stay viable, MFIs should be urged to reinvest in capital reserves and
refrain from needless borrowing. Financiers ought to be useful tools for reducing
poverty among the less fortunate.

5.4.2Development of Cordial International Associations

To draw immediate abroad lines of credit or finance, MFIs must shift their focus to a
global one when it involves business connections. This ensures affordable sources of
funding for MFIs during times of high local source costs or low economic money
supply. This directly affects the interest rates that will be applied when a customer is
given access to a credit line. It is obvious that when the cost of capital is reduced, the
interest rates charged for extending loans would likewise be lower.

5.3.5 Recommendations for Further Studies

MFIs in Zimbabwe were the main topic of this research. Therefore, it is advised that
research be conducted to better comprehend the impact of interest rate regulation on
the financial performance of the monetary sector, which is essential for the expansion
of the economy, including conventional banking firms such as commercial banks.

38