Malawi’s SME Sector: A Year of Resilience and Growth Amidst Challenges in 2025
Key Business Points
- SMEs in Malawi faced significant challenges in 2025, including high interest rates, rising inflation, and limited access to finance, which reduced consumer purchasing power and drove up business operating costs.
- Government investment in priority sectors created opportunities for SMEs, particularly in agro-processing and tourism services, generating jobs and promoting economic growth.
- Implementation of the Micro, Small and Medium Enterprises Act of 2024 in 2026 is expected to widen access to capital and encourage formalisation of informal businesses, benefiting SMEs and the private sector as a whole.
The performance of small and medium enterprises (SMEs) in Malawi in 2025 was described as uneven by the National Small and Medium Scale Enterprises (Nasme), citing a tough economic climate marked by high interest rates, rising inflation, and limited access to finance. According to Nasme SME Ambassador for the Southern Region, Patrick Chatanga, most SMEs struggled to remain afloat due to macroeconomic challenges largely beyond their control. Inflation reached about 30 percent at the start of the year, reducing consumer purchasing power while driving up business operating costs. The situation was worsened by persistent foreign exchange shortages and high levels of government borrowing, which squeezed private sector access to credit.
Despite these challenges, Chatanga pointed out positive developments, particularly increased government investment in priority sectors under the Agriculture, Tourism, Mining and Manufacturing strategy. This created opportunities for SMEs, especially in agro-processing and tourism services, generating jobs in the process. He highlighted progress among women-led SMEs producing locally made goods, such as cleaning products, which increasingly meet quality standards and reduce reliance on imports.
Looking ahead, Chatanga said the anticipated implementation of the Micro, Small and Medium Enterprises Act of 2024 in 2026 could widen access to capital and encourage formalisation of informal businesses. On prospects for 2026, he said SMEs are cautiously optimistic, expecting the government to adopt more disciplined borrowing policies. Economist Velli Nyirongo noted that the crowding-out effect was severe for SMEs, as high interest rates and government borrowing led banks to favour lower-risk government securities.
The Ministry of Industrialisation, Business, Trade and Tourism spokesperson, Patrick Botha, said government efforts focus on formalising SMEs through capacity building in financial management and value addition, supporting a shift from a consumption-based to an export-led economy. Botha said the ministry is working with development partners and financial institutions to improve long-term access to finance. He added that SMEs must register with the ministry and have products certified by institutions such as the Malawi Bureau of Standards to benefit from these initiatives. As the economy looks to 2026, SMEs are expected to play a crucial role in driving economic growth, with the government’s efforts to support their development and growth. Kusintha kwa SMEs, or the growth of SMEs, is crucial for Malawi’s economic development, and the government’s initiatives aim to promote kulima kwa ajira, or job creation, and kuchita kwa ubale, or economic empowerment.
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