Key Business Points
- Low-cost loans from the Financial Inclusion and Entrepreneurship Scaling (Fines) project have improved production and cash flow for over 48,000 small-scale firms in Malawi, but manufacturers are seeking additional capital to boost their businesses.
- Malawi’s business capital growth has decelerated from 23% in 2017 to 5% in 2020 due to high inflation, large fiscal and current account deficits, and high costs of credit, making it essential for businesses to explore alternative funding sources.
- The country’s private sector credit to gross domestic product is low, at 1.8%, compared to other countries in the region, highlighting the need for increased access to financial services and investment opportunities.
The low-cost loans from the Fines project have been a lifeline for many small-scale firms in Malawi, enabling them to improve production and cash flow. However, manufacturers are now seeking additional capital to boost their businesses and meet growing market demands. Tammie Investment Limited, for example, wants to expand its storage facilities and increase its maize processing capacity to meet the demand for maize flour and bram in Zimbabwe. The firm’s managing director, Aaron Mwasokwa, emphasized the need for more capital to achieve their growth ambitions, saying "ndife timakondera" (we want to expand).
Other firms, such as Bio Energy Resources Limited, are also exploring additional funding sources and growth opportunities to scale their businesses. The company plans to establish a refinery to produce 100% bio-diesel for the agriculture and transport industries, which will help meet the growing need for diversified fuel sources. Kusintha kwa kawalleyo (increasing capacity) is crucial for these firms to achieve their growth objectives.
The African Economic Research Consortium data shows that only 15% of Malawian companies have a bank loan or line of credit, compared to an average of 30% in sub-Saharan Africa. This highlights the need for increased access to financial services and investment opportunities in Malawi. The African Development Bank (AfDB) data also indicates that Malawi’s growth in business capital has decelerated due to high inflation, large fiscal and current account deficits, and high costs of credit.
The Fines project, an $86 million five-year Malawi Government project, aims to increase access to financial services and promote entrepreneurship. Although the initial funds have been exhausted, the project is recycling repayments to keep meeting demand, and preparations are underway for a successor programme expected to start around May 2026. Kuzigwira kwa mpheto (recycling repayments) will help ensure that the project continues to support businesses in Malawi.
With over 1.6 million small businesses in Malawi, the majority being microenterprises, it is essential to provide them with access to financial services and investment opportunities to drive economic activity and production. The private sector credit to gross domestic product is low, at 1.8%, compared to other countries in the region, highlighting the need for increased investment in the sector. By providing mik.horizontali ya kifundo (access to financial services) and promoting entrepreneurship, Malawi can unlock its economic potential and achieve sustainable growth.
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