Determinants of Financial Inclusion among Small and Medium Enterprises in the Sub-Saharan Context: Empirical Evidence from Kitwe, Zambia

Abstract

This investigation delineates the determinants of financial inclusion among Small and Medium Enterprises (SMEs) within the Kitwe District of Zambia, a region vital to the nation’s industrial fabric yet plagued by persistent credit accessibility constraints. Employing a rigorous quantitative correlational research design, the study uses a sample of 312 SMEs to examine the relationship between supply-side factors, demand-side variables, market opportunities, borrowing costs, collateral requirements and financial inclusion. The empirical evidence, derived through hierarchical multiple regression analysis, demonstrates that demand-side factors (b = 0.232, p < 0.1%), market opportunities ( b = 0.260, ???? < 0.1%), collateral requirements (b = 0.224,  p < 0.1%), and the cost of borrowing (???? = 0.206, p < 0.1%) constitute statistically significant predictors of financial inclusion. Conversely, supply-side factors ( b = −0.101, ???? > 5%) yield an insignificant influence when other variables are controlled, suggesting a profound demand-side dominance in the Zambian credit market. These findings underscore that the mere proliferation of financial institutions is insufficient to bridge the inclusion gap without accompanying reforms in SME internal capacity and the mitigation of prohibitive capital costs. The research offers a substantial contribution to the development finance discourse in Sub-Saharan Africa by providing a localized empirical foundation for policy interventions aimed at rectifying the systemic exclusion of the enterprise sector in Zambia.