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Malawi SMEs access to capital remains a challenge

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SMALL and medium enterprises (SMEs) in the country continue to lament over hassles they encounter when accessing loans for capital from financial institutions, saying most conditions remain “prohibitive.”

Apart from concerns over high borrowing charges by the commercial banks, the small and medium business operators feel financial institutions set conditions that make it almost impossible to access the loans.

The observation was reiterated at a forum initiated by the Small and Medium Enterprises Development Institute (SMEDI), where some players from the sector faced officials from some financial institutions, brainstorming ideas on breaking the prevalent barriers.

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Among major concerns include what they call demand for unrealistic collateral, and other charges that are not in tandem with the magnitude of their businesses.

In his presentation, SMEDI Executive Director, Edward Chilima, said in most cases, small businesses are marginalised, hence, the concerns.

“For any economy to grow, it needs to have a health SME sector, because it forms the basis for growth. They [players] have got the ideas, and interest but they lack the financial push.

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“The financial sector seems not to be in line with the development of SMEs. It has got products that are favouring and targeting the already grown businesses,” lamented Chilima.

A representative of the small scale business operators, Wales Chakukuma, echoed Chilima’s sentiments, calling on commercial banks to revise their conditions. He cited consideration over the set collateral such as infrastructures, most of which players do not have, despite having viable business ideas.

“We have so many challenges when we want to access financing from the banks. One prime focus is security and our major request is that the banks should change their way of doing things,” he said.

Representatives from some of the commercial banks, however, also faulted the players for what they call laxity over set standards and requirements. They also expressed concerns over high default rate among most small-scale players.

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