Banker tips SMEs on business financing
Investment banker and strategist Misheck Esau says small and medium enterprises (SMEs) can easily access capital for investment if they organise themselves and properly document their ideas.
Esau, who is an entrepreneur and seasoned banker, said this on Friday in his presentation that centred on how SMEs can position themselves to access and raise capital for business at a wealth creation conference organised by Sycamore Consult.
He said how SMEs organise themselves is the beginning of an easier way of accessing capital that has been elusive for many small businesses.
Said Esau: “It is important for Malawian businesses to organise themselves as finance does not follow people who are disorganised.
“Businesses need to document their ideas because formal institutions such as banks are hesitant to finance businesses that are not clear with their plans. Businesses should thus show their potential to create a fast solution to the customer as this is what lenders look for.”
Esau argued that capital is not scarce in the country, challenging entrepreneurs to collaborate to ensure that both borrowers and lenders converge for greater access to finance SMEs.
He called on government to ensure that it goes further with the new SMEs Order by directing government ministries, departments and agencies that do business with SMEs to pay them on time, saying this would make the businesses to be liquid.
The SMEs Order, gazetted on December 14 2020, was designed to break monopolies of big and established businesses that have been dominating in public procurement.
On his part, Chamber for Small and Medium Businesses Association executive secretary James Chiutsi admitted that many SMEs are not organised, but said they face access to finance challenges due to strict collateral requirements.
He said this is despite the country having several entrepreneurs with sound business ideas, but no means to acquire assets.
Said Chiutsi: “Not many people have acquired assets that can be used as collateral.
“While it is a fact that most businesses are not organised, it should be known that formal registration has only been an expense for small businesses.”
A Finscope study indicated that in Malawi, majority of SMEs are failing to access finance despite the sector being a significant source of employment, providing jobs to 1.6 million people.
In its Malawi Economic Monitor, the World Bank said only 10 percent of medium scale enterprises, five percent of small-scale enterprises and three percent of micro scale enterprises have credit from commercial banks.
This is despite the country having 60 percent of businesses being microenterprises, employing one to four people, 32 percent being small enterprises, employing five to 20 people and only eight percent being medium enterprises, employing 21 to 99 people.
