This paper investigates how legal and regulatory structures impact microfinance ownership and performance. It draws from the institutional story of Zambia which has experienced regulatory and legislative flux since drafting its first microfinance act in 2006. Based on interviews with key stakeholders in the Zambian microfinance industry, the paper highlights the negative effects of this act and the subsequent imposed interest rate cap. It finds that foreign rather than local ownership and not having historical roots in a not-for-profit model is advantageous for MFI survival in these turbulent institutional conditions. Therefore, it provides an important contribution to understanding the effects of regulatory failure in microfinance with theoretical as well as important practical implications
