Factors Determining The Type of Capital Structure in MFIs: A Case Study of Kitwe District

The primary components of the structure that influence the MFIs in Kitwe District, in terms of capital development of Zambia, are the central variables that determine what enables them to choose their capital structure, as well as challenges they confront in their different sources of finance. This paper, using data from 40 MFIs and multiple research methods, found that external factors such as the cost of borrowing (30%) and market conditions (25%) had a stronger impact on financing choice for them than internal factors within their institutions. The results suggest that there is no significant relationship between size of the institution and borrowing costs, suggesting that all MFIs also have market disadvantages irrespective of their size. Similar problems were found in all types of capital structures, indicating high debt costs (42.5%), cash flow deficiencies (37.5%), and repayment difficulties (44.25%). The other analysis found no definite relationship between the type of capital structure and these problems (2(6) = 8.503, p = 0.204), which implies that these problems are caused mostly by larger economic circumstances, rather than a coordinated financing of each MFI. To overcome these difficulties, respondents mentioned diversifying funding sources (35%) and establishing stronger institutional partnerships (50%). It concludes that the difficulty MFIs have to manage their capital structure is mostly systematic. These solutions should be based on the reduction of borrowing costs, access to the capital market, and regulatory support, rather than relying only on changes at individual institutions.