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Study outlines SMEs growth challenges

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Findings of a recent study by FinMark Trust has outlined lack of access to finance and structured markets as well as poor infrastructure as some of the major constraints to growth of micro small and medium enterprises (MSMEs).

The study, jointly conducted with Genesis Analytics, was commissioned by some of the country’s development partners. The report was launched on Monday in Lilongwe.

It suggests that formal financing to MSMEs is nearly K60 billion, which is only about three percent of total assets in the financial sector. It adds that banks face myriad challenges in providing finance to SMEs, including lending models not tailored to MSMEs, high perception of risk due to low levels of financial and business capacity of SMEs, and infant credit information sharing and collateral registry.

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It further notes that microfinance institutions are the second largest providers of finance but are characterised by weak capital bases and high non-performing loans, limited risk management and product development capabilities and high operating costs and governance challenges.

According to the report, 26 percent of 1,142,700 MSMEs are excluded from the financial scope. Speaking during the launch acting World Bank Country Manager Javier Zuleta said development partners had started utilising some of the findings of the survey in designing programmes that are already underway or will soon go into implementation.

“The findings are further expected to inform further implementation of the UNDP’s $30 million Malawi Innovation Challenge Fund and $5 million Growth Accelerator programmes,” Zuleta said.

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Secretary for Industry Peter Simbani said it rated the findings as disheartening.

“We need to join hands to come up with relevant interventions which will ensure that this should be a thing of the past,” Simbani said.

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