By Sungeni Chaheka:
It is common knowledge that poverty is deeply entrenched in our society. Latest revelations by United Nations Human Development Report state that Malawi is characterised by multidimensional poverty that has a deprivation rate of about 33.3 percent.
Multidimensional poverty is multifaceted. It is poverty that stings in all aspects of life at both local and national level. Multidimensional poverty is mostly a product of unequal distribution of opportunities, resources and power in the country. Thus inequality is leading to unprecedented levels of poverty.
In a developing country like ours, opportunities for economic growth exist but are underutilised. Upon closer scrutiny, one can observe that Malawi is endowed with a plethora of resources. These include: human, natural and financial resources.
In human resources, the country has an abundant reserve of both skilled and unskilled labour which is, unfortunately, often tapped by neighbouring countries. In natural resources, Malawi is blessed with diversified resources such as lakes, vegetation, rare and precious minerals, good soils and mountains.
As for financial resources, the country has enough finances that only require prudent management. It is unfortunate that some of these resources are not distributed equally in the country consequently giving rise to multidimensional poverty.
For instance, financial resources form a basis for capital which is one of the factors of production. Business of any scale requires start-up capital. This capital is mostly provided as a loan or credit by financial institutions such as banks and other money-lending organisations.
In Malawi for one to access a credit or a loan it is not easy. The conditions attached to the loans render it difficult for a common man to access them. For instance, most banks demand large collaterals from someone who wants to obtain a loan. The collateral acts as a security for the loan and it can be in form of liquid or fixed assets.
The large collaterals scare away people as most of them are poor. In addition to that, banks sometimes also charge high interest rates. This makes it difficult for individuals and businesses to service their loans as they will need a lot of money to repay them.
Furthermore, banks also tend to be reluctant to offer small loans. This is due to the costs of administering a small loan which may be higher than the interest to be realised by the bank from the loan.
However this becomes a challenge to people with the intention of starting a small business as they require small loans. Sometimes banks also prefer group assets. This involves people applying for loans in groups and not as individuals. This too is problematic as individuals may have different ideas and scales of conducting their businesses.
In a nutshell, such conditions and many others result in unequal distribution of financial opportunities as they tend to be favourable towards the rich. Thus, such conditions pose as a deterrent in the quest to access credit in the country, no wonder access to credit has been pegged at a meagre 3 percent.
Even Reserve Bank of Malawi Governor Dalitso Kabambe recently advocated the need for banks to come up with customer-centric approaches to improve access to credit. Such approaches have the potential to increase the number of people who can access credit from financial institutions as they can be favourable and reasonable.
Malawi is one of the countries blessed with motivational speakers whose ideas tend to be simple and appear practical. However, such ideas require some financial stamina in order to materialise. Perhaps motivational speakers should start crafting some messages tailor made for financial institutions to soften conditions attached to provision of credits.
In addition to that, the country has a pool of young and bright minds whose ideas are yet to be harnessed. Of late the country has witnessed a number of innovations from various local universities and colleges as well as from individuals who barely attended formal schooling.
Such innovations were supposed to be taken seriously and thereafter utilised to the maximum. Most of these bright minds mention lack of finances as the main challenge to their innovative works.
Now if such people could access credits with less hurdles, chances are high that Malawi can reap the fruits of motivational speeches and innovative ideas. Hence entrepreneurship can blossom and become engrained in our society. This can catalyse economic growth and consequently help to counter multidimensional poverty.
For Malawi to deal with multidimensional poverty, there is need for collective efforts. Such efforts can be divided to face a particular dimension of poverty separately. By revising conditions attached to acquisition of credits, financial institutions can help mitigate one dimension of poverty in the country.