Exploring The Influence of Kwacha Fluctuations on Medium Small and Micro Enterprises Mmsmes Profitability: A Case of Choma District Southern Zambia

This study investigated the impact of kwacha fluctuations on the financial performance of Micro, Small and Medium Enterprises (MSMEs) in Choma District, Zambia, specifically on how demographic characteristics, sectoral distribution, and managerial strategies influence enterprise resilience to currency volatility. Using both descriptive and correlation analyses, the study found that MSME operators are mmostly male (59.6%) and the majority aged between 36 and 45 years, with most possessing only primary or secondary education. This demographic structure significantly constrains financial literacy and the capacity to apply sophisticated risk management tools such as hedging. The findings revealed that 98% of MSMEs are import-driven, making them acutely vulnerable to kwacha depreciation, which inflates procurement costs and erodes profitability. Retail and manufacturing sectors exhibited the highest exposure, showing large fluctuations in net profit margins (NPM) and profit growth rates (PGR), while service-oriented sectors such as education and finance displayed relative stability. The study further established that most MSMEs depend on informal coping mechanisms primarily inventory management and reactive pricing adjustments rather than formal financial instruments, due to limited financial literacy, weak supplier networks, and restricted access to capital markets.
Correlation analysis confirmed significant relationships between currency volatility, pricing strategies, import reliance, and profitability, as well as a positive association between education level, enterprise size, supplier relationships, and hedging adoption. The findings affirm theoretical perspectives from the Resource-Based View (RBV) and Purchasing Power Parity (PPP), emphasizing that internal capacity and market exposure determine enterprise resilience.
The study concludes that MSMEs in Choma District face systemic vulnerabilities to exchange rate instability due to import dependence, weak financial management practices, and limited macroeconomic awareness. It recommends targeted financial literacy programmes, improved access to hedging instruments, promotion of local value chains, and macroeconomic stability as crucial pathways for enhancing MSME resilience and sustainable growth in Zambia’s volatile economic environment.

MSMEs, exchange rate volatility, kwacha depreciation, financial performance

1. Abor, J. & Quartey, P., 2010. Issues in SME development in Ghana and South Africa.. International Research Journal of Finance and Economics, Volume 39, p. 218–228.. [Google Scholar] [Crossref]

2. Africa Economic Outlook (AEO), 2021. From Debt Resolution to Growth: The Road Ahead for Africa, South Africa: African Development Bank (ADC). [Google Scholar] [Crossref]

3. Akinlo, A. E., 2015. Exchange rate volatility and SME profitability in Nigeria.. Journal of Economics and Sustainable Development, 6(7), pp. 45-53. [Google Scholar] [Crossref]

4. Banda, B., 2025. Financial Instruments. Formal Vs Informal Fianancial Instruments , Issue unpublished paper. [Google Scholar] [Crossref]

5. Bank of Zambia, 2021. MONETARY POLICY COMMITTEE STATEMENT, Lusaka: Bank of Zambia. [Google Scholar] [Crossref]

6. Barberis, N. & Thaler, R., 2003. A Survey of Behavioral Finance. In Handbook of the Economics of Finance,. 1, 1053–1128: s.n. [Google Scholar] [Crossref]

7. Barney, J. B., 1991 . Firm Resources and Sustained Competitive Advantage.. Journal of Management,, 17(1), p. 99–120.. [Google Scholar] [Crossref]

8. Belghitar, Y., Clark, E., Dropsy, V. & Mefteh-Wali, S., 2021. The effect of exchange rate fluctuations on the performance of small and medium sized enterprises: Implications for Brexit. Quaterly Review of Economics and Fianance , pp. 399-410. [Google Scholar] [Crossref]

9. Cassel, G., 1918. Abnormal Deviations in International Exchanges.. The Economic Journal, , 28(112), p. 413–415.. [Google Scholar] [Crossref]

10. Chigozie, O. C., 2021. Effect Of The Naira Devaluation On Small And Medium Scale Enterprises In Nigeria, OGUN STATE, NIGERIA: MOUNTAIN TO UNIVERSITY, IBAFO. [Google Scholar] [Crossref]

11. Chilanga, M. & Kunda, D., 2025. Development and Implementation of the Predictive System of Zambian Kwacha Rate using Data Minining. European Journal of Engineering and Technology Research, 10(2), pp. 31-38. [Google Scholar] [Crossref]

12. Chilufya, J. & Mwewa, B., 2022 . Exchange rate volatility and SME performance:Evidence from Zambia.. Zambian Journal of Economics, 8(1), pp. 56-74. [Google Scholar] [Crossref]

13. Chirwa, T. G. & Odhiambo, N. M., 2017. The nexus between key macroeconomic determinants and economic growth in Zambia: A dynamic multivariate granger-causality linkage,". Working Papers 23476, University of South Africa, Department of Economics.. [Google Scholar] [Crossref]

14. Chitambala, M. C., 2019. EFFECTS OF CURRENCY DEPRECIATION ON GROWTH IN ZAMBIA, Lusaka Zambia: University of Zambia . [Google Scholar] [Crossref]

15. Choma Municipal Council, 2021. CHOMA INTERGRATED DEVELOPMENT PLAN. Choma, Zambia: Choma Municipa Council . [Google Scholar] [Crossref]

16. Common Market for Eastern and Southern Africa, (., 2020. SOCIO-ECONOMIC IMPACTS EVIDENCE FROM COMESA REGION, Tanzania: Comesa. [Google Scholar] [Crossref]

17. Dornbusch, R., 1987. . Purchasing Power Parity.. s.l.:In: Eatwell, J., Milgate, M., &. [Google Scholar] [Crossref]

18. Eiteman, D. K., Stonehill, A. I. & Moffett, M. H., 2016. Multinational Business Finance. 14 ed. s.l.:Pearson Education.. [Google Scholar] [Crossref]

19. European Union, 2015. THE IMPACT OF CURRENCY FLUCTUATIONS. Brussels, European Union. [Google Scholar] [Crossref]

20. Eze, A. G. & Okpala, C. S., 2015 . Quantitative analysis of the impact of exchange rate policies on Nigeria’s SME performance.. Journal of Economics and Finance, 6(6), , 6(6), p. 01–09.. [Google Scholar] [Crossref]

21. Hambayi, T., 2020. Why is the Zambian Kwach depirciating. insight partners africa, Issue https://www.insightpartnersafrica.com/why-is-the-zambian-kwacha-depreciating/. [Google Scholar] [Crossref]

22. International Trade Center, 2022. Meeting of the Joint Advisory Group on the International Trade Centre, 57th session, s.l.: https://unctad.org/meeting/meeting-joint-advisory-group-international-trade-centre-57th-session. [Google Scholar] [Crossref]

23. Kahunde, R., Lakuma, C. P. & Sserunjog, B., 2021. How currency fluctuations affect SME access to credit. Brife Ploicy , pp. 1-4. [Google Scholar] [Crossref]

24. Kuntashula, J. A., 2020. EFFECTS OF EXCHANGE RATE CHANGES ON THE ZAMBIA´S TRADE, s.l.: University West . [Google Scholar] [Crossref]

25. Lakuma, C. M. R. & Muhumuza, 2019. F. Financial inclusion and micro, small, and medium enterprises (MMSMEs ) growth in Uganda.. J Innov Entrep 8, 15 (2019), 8(15). [Google Scholar] [Crossref]

26. Lawrence, R., 1976. Managing Foreign Exchange Risk.. Journal of International Business Studies,, 7(1), pp. 5-10. [Google Scholar] [Crossref]

27. Lungu, D. & Kaubi, M., 2017. The impact of kwacha depreciation on small and micro enterprises (MSMEs ): Case study: MSMEs in the. International Journal of Multidisciplinary Research and Development, 4(9), pp. 4-17. [Google Scholar] [Crossref]

28. Madura, J. (., 2008. International Financial Management (9th ed.). 9th ed. s.l.: Mason, OH: South-Western Cengage Learning. [Google Scholar] [Crossref]

29. Mbao, F. Z., 2021. Dynamic Behaviour and Drivers of the Kwacha-US. Bank of Zambia Working Paper Series , pp. 1-29. [Google Scholar] [Crossref]

30. Mensah, J., K, Amoah, L. & Tetteh, S., 2021. Exchange rate volatility and SME pricing behaviour in Ghana. African Journal of Economic Policy, 28(2), p. 110–125.. [Google Scholar] [Crossref]

31. Metumara, D. M., 2023. Continued Depreciation of the Naira and Its Impact on the economy, Ota, Nigeria: Covenant University,. [Google Scholar] [Crossref]

32. Ministry of Finance, 2020. Economic Report, Lusaka: Government Printers. [Google Scholar] [Crossref]

33. Mwansa, D., 2020. A STUDY OF THE MACRO ECONOMIC FACTORS AFFECTING THE VALUE OF THE ZAMBIAN KWACHA, Lusaka Zambia: The University of Zambia. [Google Scholar] [Crossref]

34. Myers, S. C., 1977. Determinants of Corporate Borrowing.. Journal of Financial Economics,, 5(2), pp. 147-175. [Google Scholar] [Crossref]

35. Nanjundeswaraswamy, T. S. & Divakar, S., 2021. DETERMINATION OF SAMPLE SIZE AND SAMPLING METHODS IN APPLIED RESEARCH. Proceedings on Engineering Sciences •, pp. 25-32. [Google Scholar] [Crossref]

36. Ngugi, J. K., Gakure, R. & Waititu, G., 2019. The influence of currency fluctuation on SME pricing strategies in Kenya.. International Journal of Business and Social Science, , 10(4), pp. 88-95. [Google Scholar] [Crossref]

37. Nyirenda, T. A. C., 2020. THE IMPACT OF DEPRECIATING KWACHA ON FINANCIAL , Zambia: Cavendish University Zambia. [Google Scholar] [Crossref]

38. Opler, T. C. & Titman, S., 1994. Financial Distress and Corporate Performance.. Journal of Finance, 49(3), , 49(3), p. 1015–1040.. [Google Scholar] [Crossref]

39. Parker, J., 2015. THEORIES OF INVESTMENT. USA: Economics 314 Coursebook. [Google Scholar] [Crossref]

40. Peteraf, M. A., 1993. The Cornerstones of Competitive Advantage: A Resource-Based View.. Strategic Management Journal, 14(3), , 14(3), p. 179–191.. [Google Scholar] [Crossref]

41. Prerna Salvi & Suchismita Sengupta, 2016. Effect of RUPEE Depreciation on SME SECTOR. Journal of Business and Management, Issue www.iosrjournals.org, pp. 96-102. [Google Scholar] [Crossref]

42. Rogoff, K., 1996. The Purchasing Power Parity Puzzle.. Journal of Economic Literature, 34(2), pp. 647-668. [Google Scholar] [Crossref]

43. Shapiro, A. C., 2006. Multinational Financial Management. Hoboken, NJ: Wiley. ed. s.l.:8th . [Google Scholar] [Crossref]

44. Sikabbwele, N., 2024. EXCHANGE RATE VOLATILITY AND TRADE OUTCOME, Lusaka Zambia : University of Lusaka . [Google Scholar] [Crossref]

45. Siwale, T., 2021. One year on: Zambian economy during COVID-19. International Growth Center , 18 March, pp. 1-3. [Google Scholar] [Crossref]

46. Sternberg, R. J. & Zhang, L.-f., 2011. Revisiting the Investment Theory of Creativity. CREATIVITY RESEARCH JOURNAL, 23(3), pp. 229-238. [Google Scholar] [Crossref]

47. Tambunan, t., 2019. The impact of the economic crisis on micro, small, and medium enterprises and their crisis mitigation measures in S outheast. Asia & The Pacific Policy Studies, Volume 6, pp. 19-39. [Google Scholar] [Crossref]

48. Thaler, R. H., 1993. Advances in Behavioral Finance.. s.l.:Russell Sage Foundation.. [Google Scholar] [Crossref]

49. Wernerfelt, B., 1984. A Resource-Based View of the Firm.. Strategic Management Journal, , 2(5), p. 171–180.. [Google Scholar] [Crossref]

50. Whitaker, R. B., 1999. The Early Stages of Financial Distress.. Journal of Economics and Finance,, 23(2), p. 123–132.. [Google Scholar] [Crossref]

51. World Development Report, 2022. Finance for an Equitable Recovery,, s.l.: https://www.worldbank.org/en/publication/wdr2022#downloads. [Google Scholar] [Crossref]

52. Zambanker, 2020. BoZ responds to deteriorating Macro economic Environment and Covid 19. A Bank of Zambia Journal , pp. 1-44. [Google Scholar] [Crossref]

• Assessment of the Role of Artificial Intelligence in Repositioning TVET for Economic Development in Nigeria
• Teachers’ Use of Assure Model Instructional Design on Learners’ Problem Solving Efficacy in Secondary Schools in Bungoma County, Kenya
• “E-Booksan Ang Kaalaman”: Development, Validation, and Utilization of Electronic Book in Academic Performance of Grade 9 Students in Social Studies
• Analyzing EFL University Students’ Academic Speaking Skills Through Self-Recorded Video Presentation
• Major Findings of The Study on Total Quality Management in Teachers’ Education Institutions (TEIs) In Assam – An Evaluative Study