Financial sector shunning SMEs—Smedi

Small and Medium Enterprise Development Institute (Smedi) says the financial sector in the country continues to shun the small and medium enterprises (SMEs) despite efforts to grow the sector.

Speaking during a daylong meeting with some of the country’s financiers in Blantyre on Friday, Smedi director of business information and training Edward Chilima said that most of the financiers in the country are shunning the sector because of the high default rates as well as the size of their businesses.

“Financiers need to identify SMEs that are resilient, including those in mining, tailoring, leather, food agro-processing and that have potential not only focusing on those big businesses which tend to wind up when the going gets tough.

“We need to have a financial sector that can adjust to turbulent times. Now, things have rapidly changed and we need banks to develop products that are flexible, innovative and are risk averse. You need to look at the nurture of the project and its possibility of survival rather than looking at what an SME has,” he said.

In his remarks, representative of the Small and Medium Enterprises Association of Malawi (Smea), Wales Chakukuma, said accessing loans has remained one of the major challenges for the sector more so because of the issue of securities.

“We have always been disadvantaged because of the issue of securities, because most of the SMEs in the country do not have the kind of securities like houses and land because they are also costly,” he said.

During the interface meeting, FDH Bank representative Roselyn Kolowa said while banks cannot do away with the issue of securities, high default rates in the sector continue to increase the risk of lending.

“We are one of the banks eager to deal with SMEs but in the past, we have been let down by the high levels of defaults to as high as 85 percent. We are still working with SMEs but we ensure that securities, are in the forefront,” she said.

NBS Bank official Andrew Kambalame, who is also service centre manager for Limbe branch, said as a financial institution, the bank is always open to negotiations with its customers, hence providing room for SMEs to access financing.

According to the December 2017 Reserve Bank of Malawi (RBM) Financial Stability Report, SMEs lead in worsening non-perfoming loans at 14.7 percent.