Assessing Financial, Compliance and Operational Risks Facing CEEC-Funded Micro, Small and Medium Enterprises in Lusaka, Zambia

Government backed funding schemes are one of the few reliable channels through which Zambia’s micro, small and medium enterprises (MSMEs) can raise capital, yet comparatively little is known about the risks these businesses carry once the money has been disbursed. This study examines the financial, compliance and operational risks facing MSMEs in Lusaka District that have engaged with the Citizen Economic Empowerment Commission (CEEC) funding programme. A structured, mixed-methods survey was administered to 100 enterprises selected through stratified random sampling by business sector from CEEC-linked funding registers, of which 77 responded (a 77 percent response rate). Of these 77, only 27 (35.1 percent) had actually accessed CEEC funding at the time of the study, and 26 of the 27 completed the risk-specific sections of the questionnaire in full; these 26 form the base for all risk-awareness, training, confidence and risk-category findings reported below, while the indicators describing the respondent profile and funding uptake are reported against the full sample of 77. Across the full sample, 81.8 percent of respondent firms (63 of 77) were micro-scale operations employing ten or fewer people. Among the 26 CEEC-funded respondents, awareness of risk was uneven across categories: 84.6 percent recognised financial risk as a threat to their business, compared with 53.8 percent for compliance risk and 50.0 percent for operational risk, while 11.5 percent could not identify any of the three (respondents could select more than one category, so these figures do not sum to 100 percent). Only 7.7 percent of this beneficiary sub-sample had ever received formal risk management training, and only 19.2 percent maintained a documented plan for responding to disruption, despite 72.0 percent having experienced one. Loan repayment difficulty (84.6 percent) and machinery breakdown (65.4 percent) were the most frequently cited financial and operational threats respectively, and half of the 26 beneficiaries considered existing compliance requirements disproportionate to the size of their business. Because the risk findings describe the experience of CEEC-funded beneficiaries specifically, they are not generalised to the full 77 enterprise sample or to the wider applicant pool. Overall, the findings suggest that funding access without parallel investment in risk management capacity leaves beneficiary enterprises structurally exposed. The paper closes with recommendations directed at CEEC, sector regulators and MSME owners aimed at narrowing this gap.

MSMEs, business risk, CEEC, financial risk, compliance risk, operational risk, Zambia

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