By Benadetta Chiwanda Mia &Taonga Sabola:
Parliament on Thursday unanimously passed Bill Number 20 of 2024, Micro, Small and Medium Enterprises (MSME) Bill, which seeks to provide for the regulation, promotion and development of MSMEs, associations and business development service providers in Malawi.
The bill seeks to establish the Small and Medium Enterprises Development Corporation which will replace the Small and Medium Enterprises Development Institute (Smedi).
The bill defines a medium enterprise as a business whose amount of total investment, excluding land and buildings, is more than K200 million but does not exceed K250 million.
Further, a medium has an annual turnover of more than K59 million but does not exceed K500 million and employs at least 21 employees but not more than 59 employees.
A micro enterprise, on the other hand, is defined in the bill as an enterprise whose amount of total investment, excluding land and buildings, does not exceed K150 million.
Trade Minister Sosten Gwengwe said the bill will help authorities to pay close attention to MSMEs just like they pay attention to large corporations so that they can be formalised and seize financing and business opportunities offered by the government.
“It will also establish an accreditation system for Business Development Services providers and Business Incubation Service providers,” he said.
The bill was passed at a time the MSMEs sector, which is largely informal, has about 1.6 million players, according to the 2019 Malawi FinScope MSMEs survey, and employs about 1.8 million people.
It is estimated that MSMEs contribute about 40 percent to gross domestic product, 24 percent of employment and about 21 percent of the country’s adult population derives their livelihood from the sector.
But lack of access to finance, access to land, high business operating costs and low production capacities are some of the major challenges they continue facing.
However, the new law is aimed at, among other things, di-risking the sector and giving players a competitive edge.
Among the bill’s key highlights is the creation of the Small and Medium Enterprises Development Corporation (Smedco), an entity which will serve as the regulatory body for MSME enterprises.
The corporation is set to provide a registration framework for various stakeholders in the MSME sector, including enterprises and associations.
It will also regulate accreditation and training processes for business development service providers and offer measures and incentives to promote and develop MSMEs.
National Small and Medium Enterprises National Coordinator William Mwale highlights the absence of a supportive legal framework as a major factor hindering the growth of SMEs in the country.
“What we are looking for is close attention from the government and the regulatory body, which is currently the ministry itself. We need a fully-fledged Ministry of Small and Medium Enterprises so SMEs can have their budget and direct foreign donor funding, rather than relying on intermediaries,” Mwale said.
With a new law almost in place, the business community and stakeholders are hopeful that this initiative will usher in a new era of growth and sustainability for small and medium enterprises in Malawi.
The MSMEs sector in Malawi contributes about 40 percent to gross domestic product and 24 percent to the country’s employment. The 2019 Malawi FinScope MSME Survey reveals that about 74 percent of these enterprises are micro enterprises, 23 percent are small enterprises, and only 3 percent are medium enterprises making the sector a significant contributor to the country’s economic activities and earnings.
Despite their numerical strength and potential to contribute more to the economy, SMEs in Malawi continue to face significant operational challenges, ranging from a lack of capacity and low access to financing to other institutional barriers.
