Title: Predicting Corporate Failure: Empirical Evidence for Zambia Micro-Finance Institutions.
Authors: Arthur Chanda
Volume: 9
Issue: 10
Pages: 1-1
Publication Date: 2025/10/28
Abstract:
The purpose of the study was to develop a model to predict corporate failure in the Zambian micro-finance context using data from 2021 to 2022. This study endeavors to address the pressing need for reliable empirical models to predict corporate failure within Zambia's micro-finance institutions (MFIs), given their pivotal role in economic development and recent instances of distress in the sector. Employing an explanatory research design and quantitative methods, the study focuses on developing predictive models, particularly Altman's Z-Score model, to anticipate and mitigate corporate failure risks. Drawing on financial data from a sample of MFIs in Zambia, the study applies Altman's Z-Score model to assess the financial health and stability of these institutions. Key indicators leading to failure, including high interest rates, capital deficiency, and exposure to non-performing loans, are identified and analyzed, providing empirical evidence supporting their predictive power. The study's findings underscore the effectiveness of the Altman Z-Score model in predicting corporate failure within Zambia's micro-finance sector, with significant improvements in predictive precision observed closer to the time of failure. By applying the model to both failed and non-failed MFIs, the study reveals varying degrees of financial health within the sector, emphasizing the importance of continuous monitoring and proactive risk management practices.In conclusion, this study contributes valuable insights into predicting corporate failure among microfinance institutions in Zambia, offering stakeholders and policymakers a robust framework for enhancing risk management practices and promoting financial stability. By leveraging empirical models and key indicators, stakeholders can identify early warning signals, implement timely interventions, and safeguard the resilience of Zambia's micro-finance sector, thereby fostering economic growth and societal well-being.