Malawi Innovation Challenge Fund (Micf), a $24 million (about K19 billion) matching grant fund for the private sector, has challenged the financial sector to introduce innovative products that address the needs of small and medium enterprises.
Micf director Buddhika Samarasinghe said this in Blantyre yesterday during the launch of a new window focusing on the finance sector in which registered commercial banks and microfinance institutions in the country stand to access grants ranging from $200 000 (about K152 million) to $700 000 (about K532 million).
Micf, through this window, will harness the financial sector’s ability to generate and test new ideas that take a business-oriented approach to benefit SMEs.
Samarasinghe said the window, with has an allocation of $2 million (aboutK1.5 billion), focuses on improving access to finance to SMEs through increased new products, delivery channels and sustainable business models.
“We are trying to look at SMEs and how we can make them grow. We are trying to induce the financial sector to come up with innovative ideas that will help increase finance for SMEs and ultimately increase job opportunities as most of the finance has gone to large corporates and government debt,” he said.
Samarasinghe said they expect to see an increase in the number of SMEs that will be supported.
Available data shows that the country has about 79 SMEs.
However, according to the latest Finscope data, on average, less than six percent of SMEs access credit from formal sources with those able to access finance mainly doing so from informal sources or through friends and family.
Speaking at the same event, British High Commission charge d’ affaires Gary Lasile observed that lack of available finance continues to be the most critical issue restricting the ability of the private sector to replicate and scale inclusive business models.
“Despite the opportunities and diversity of products that can be delivered by the private sector, the financial sector has taken an extremely conservative path, focusing on large corporates and government to reduce risks and exposures,” he said.
One of the participants, Nico Asset Managers Limited chief executive officer Emmanuel Chokani described the window as an interesting proposition which is looking for innovative finance solutions in Malawi.
“Looks like digital finance solutions would go a long way to meet the criteria apart from the traditional finance options available,” he said.
Micf is a competitive, transparent mechanism that provides grant finance for innovative projects proposed by the private sector active in Malawi’s agricultural, manufacturing and logistics sectors.
Since its inception, more than 2 000 jobs have been created and impacted over 250 000 poor or near poor Malawians through an increase in income.
Micf launched the competitive facility through which businesses within the selected sectors are encouraged to apply for a grant in 2014 to fund innovative projects with focus on Malawi’s agricultural and manufacturing sectors that can deliver large social impact and help the country diversify from its narrow band of exports.