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Operational Challenges and Loan Default in Malawi's Microfinance Institutions: Evidence from a Practitioner Survey

Author

Listed:
  • Leah Donga
  • Pieter Opperman
  • Eon Smit

    (Stellenbosch University, Cape Town, South Africa)

Abstract

This study investigates challenges affecting Malawian Microfinance Institutions (MFIs) using primary survey data. The research evaluates how regulatory, macroeconomic, internal, and external obstacles influence the Average Loan Default Rate (ALDR) using Factor Analysis and multiple regression. Findings reveal that while high technology costs and infrastructure deficits are prevalent, Macroeconomic and External Issues serve as the sole statistically significant predictor of ALDR. Results indicate that MFI sustainability is tethered to external stability rather than internal management alone, thereby supporting the Resource Dependency Theory. To this end, policymakers should prioritise macroeconomic stabilisation and proportional regulation to mitigate systemic default risks.

Suggested Citation

  • Leah Donga & Pieter Opperman & Eon Smit, 2026. "Operational Challenges and Loan Default in Malawi's Microfinance Institutions: Evidence from a Practitioner Survey," The African Finance Journal, Africagrowth Institute, vol. 28(1), pages 66-79.
    • Handle: RePEc:afj:journl:v:28:y:2026:i:1:p:66-79
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    File URL: https://journals.co.za/doi/abs/10.10520/ejc-finj_v28_n1_a5
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    Keywords

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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