Group hails govt reforms, warns on interest rates
The Economic Empowerment Action Group (Eeag) has commended government for implementing a number of business reforms but has warned that high interest rates may compromise the performance of small businesses.
The group’s president Lewis Chiwalo in an interview with Business Review on Tuesday expressed optimism that projects being implemented under the Ministry of Industry and Trade to improve business competitiveness are important to the economy.
“Small businesses are the biggest employer in Malawi and it is therefore important that there is a conducive environment for their operations. Small businesses operate on small capital and cannot survive high interest rates. We would like to encourage government to look at access to finance for small businesses seriously,” he said.
The ministry is implementing an $18 million (K8.1 billion) Competitiveness and Job Creation Support Project financed by the African Development Bank (AfDB) which aims to improve the private sector, diversify the economy and create jobs.
The project targets micro and small and medium enterprises (MSMEs) and smallholder farmers in the edible oils and pulse sub-sectors.
Launched in October 2012, the project’s mid-term review is due in June this year and will end in December 2016.
Under the project, government plans to develop business to business linkages between MSMEs and lead firms in Malawi through competitive matching grants to enable firms to provide business development services and improve their turnover.
According to the ministry, commercial banks will be incentivised through matching grants to develop innovative lending practices for lending to MSMEs.
The ministry hopes that the implementation of the new innovative lending practices will lower the cost of capital and increase accessibility of finance for MSMEs.
However, a similar project implemented earlier with funding from the World Bank, the Business Environment Strengthening Technical Support Project (Bestap) was commended by the financiers for facilitating the drafting core regulations and laws.
A report on the project posted on the World Bank’s website notes that the project generally improved the business environment, including the cost of formally starting a business to about 84 percent from 216 percent of gross domestic product (GDP) at the start of the project.
