The Role of Investment Appraisal Techniques in Enhancing Financial Sustainability of Small and Medium Enterprises in Solwezi, Zambia

Abstract

This study investigates the role of investment appraisal techniques in enhancing the financial sustainability of Small and Medium Enterprises (SMEs) in Solwezi, Zambia. Despite their economic importance, SMEs in Zambia face high failure rates, with financial sustainability being a key challenge. The research employs a sequential explanatory mixed-methods approach, combining a quantitative survey of 280 SMEs with qualitative interviews of 20 key informants. Financial literacy of owners/managers, financial sustainability, decision-making processes, and the political environment emerge as critical factors influencing the adoption and application of these techniques. The study finds a significant positive relationship between the frequency of investment appraisal technique usage and SME financial sustainability (β = 0.303, t = 2.367, p < 0.05). Based on these findings, the research proposes an Ideal Investment Appraisal Technique Framework tailored to the Solwezi context. This research contributes to the limited literature on investment appraisal practices among SMEs in developing economies and provides practical insights for policymakers and SME support organizations in Zambia. Future research could explore specific barriers to consistent application of these techniques and investigate the role of digital technologies in facilitating their adoption.