Local small and medium enterprises (SMEs) have an opportunity to access an $86 million (about K87 billion) loan facility through the Reserve Bank of Malawi’s (RBM) under Financial Inclusion and Entrepreneurship Scaling (Fines) project.

The five-year project, supported by the World Bank, is dangling the loan facility to entrepreneurs to increase access to financial services, promote entrepreneurship and capabilities of SMEs.

RBM headquarters in Lilongwe where monetary policy decisions are made

Speaking during a sensitisation meeting with members of National Association of Business Women (Nabw) in Blantyre yesterday, Fines project financial sector specialist Gilford Kadzakumanja said since the project rolled out in 2020, financial institutions have accessed K46 billion for onward disbursement to businesses.

He said: “We started with a few institutions getting these funds for onward disbursement to businesses, but the numbers have grown, an indication that there is demand for the loans.

“The purpose is to ensure more vibrant businesses.”

Kadzakumanja said through the project, they also train entrepreneurs to acquire financial literacy knowledge and skills before accessing the loans.

He said the project is expected to wind up in 2025, but there is a possibility for extension to ensure the funds continue circulating in the economy to create jobs.

In Malawi, access to loans remains a challenge with World Bank figures showing that majority of SMEs fail to access finance despite the sector being a significant source of employment to 1.6 million people.

The figures further show that only 10 percent of medium enterprises, five percent of small enterprises and three percent of micro enterprises have access to credit from commercial banks.

While admitting that there has been a mismatch in the financial sector in terms of access to finance to individuals from formal institutions, Kadzakumanja said the project is there to provide flexibility to entrepreneurs.

He said: “Loans under this project have flexible repayment periods, with an interest rate of 11 percent per annum for those accessing these loans from banks and three percent per month for micro finance institutions.”

Nabw board chairperson Susan Mkandawire said expectations are high for improved livelihoods for women-owned businesses.

“Most financial institutions view us as undeserving part of the community; hence, access to loans has been a challenge,” she said.

Finca Malawi regional sales manager Monase Chinamali said the facility has boosted liquidity for the institution, which has ultimately been channeled to various businesses.

“We have this far provided over 50 percent of the funds under the project to entrepreneurs, which has given much need capital to deserving entrepreneurs,” she said.

NBM Development Bank project officer Joseph Mhango said the bank received K8 billion for the Fines project and approved projects worth K4.4 billion under the Fines loans.

“Of these, 46 percent are women- owned or led businesses,” he said. The project has four components, including liquidity engagement to SMEs, scaling entrepreneurship and building firm capabilities, enhancing the enabling environment for supporting the financial inclusion and growth of entrepreneurship and project implementation support.

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