Govt invests $2.4m in micro-finance institutions

Ministry of Industry and Trade and the African Development Bank (AfDB) have invested $2.4 million (about K1 billion) to boost micro-finance institutions in the country under the financial innovation grant scheme.

The ministry’s procurement specialist, Wesley Mwamadi, told Business Review last week the concept behind financial innovation grant is to woo commercial banks and micro-finance institutions (MFIs) to develop innovative lending practices for small and medium enterprises (SMEs) and also address reluctance of MFIs to lend to SMEs.

“The MGS is a component of the competitive and job creation support project. The outcome is that we want the creation of small and medium enterprises departments in most commercial banks and lending institutions as is the case in countries like Japan.

“SMEs development is key to the success of this country. Through MGS, we want to see micro-finance institutions and banks invest in ICT [information and communication technology] solutions to deepen access to finance or create partnerships with international MFIs with expertise in SMEs,” he explained.

Through MGS, financial institutions will benefit up to $300 000 (K132 million) upon successful applications.

International Financial Consultancy (IFC), a firm entrusted with approving successful applicants, said the condition of the grant is that financial institutions wishing to benefit should not use the money as capital for lending, or for interest rate subsidy, and should also not be used as risk capital or for external capacity building.

“The purpose is to help financial institutions to better serve their clients, especially small business. The grants will enhance their capacities to be more innovative and act in a competitive way to provide cheaper products and services to small businesses.

“We want bank departments to work hand in hand with SMEs to create linkages with bigger business,” said Zach Bloomfield, a consultant with IFC, who is in the country to conduct awareness for MFIs on the MGS requirements.

Malawi Microfinance Network (Mamn) executive director Duncan Phulusa has expressed gratitude to government for the facility, saying it will support financial institutions, some of whom are their members.

“This will help them meet the demand that is out there in terms of loans and other things that will strengthen the capacity of the MFIs to better serve their clients,” he said.

The MGS was launched last week in Lilongwe.