Evaluating the Effect of the Bank of Zambia's Monetary Policy Rate (MPR) on the Cost of Borrowing for Individuals and SMEs in Lusaka

This study investigated the impact of the Monetary Policy Rate (MPR) on borrowing costs, borrower behavior, and credit access for individuals and SMEs in Lusaka. Employing a quantitative research design, the research analyzed quantitative data from 51 respondents using descriptive statistics, Chi-square, and binomial tests. The findings reveal a critical paradox, while 66.7% of respondents were aware of the MPR and 56.9% believed it influenced their loan costs, statistical analysis found no significant direct link in borrower perception between MPR awareness and their belief about its influence on borrowing costs (χ²=3.43, p=0.180), indicating a substantial financial literacy and transparency gap. On the other hand, the effects on behavior and access were striking,high interest rates actively deterred 66.7% of borrowers from applying for loans (p=0.012),it made 41.7% borrow less, and limited access for 58.8% of applicants, primarily due to collateral requirements (58.6% of denials).The study concludes that the MPR's main impact on the economy comes not just from changing costs, but also from reducing loan demand and limiting access. It recommends improving financial education, increasing transparency in lending and creating support mechanisms to ease credit access. These steps are necessary to make monetary policy more effective and inclusive in Zambia.