The International Finance Corporation (IFC), the private sector investment arm of the World Bank Group, has expressed willingness to support the growth of small and medium enterprises (SMEs) to graduate them into large corporates.
The development is part of the IFCs Malawi Private Sector Diagnostic Initiative that focuses on supporting the country’s private sector to grow.
In an exclusive interview with Business Review, IFC resident representative for Malawi and Zambia Madalo Minofu said the country’s private sector has small businesses which need handholding for growth.
She said: “The private sector labs launched by President Lazarus Chakwera are targeted at the large corporates, but they are few in Malawi which is a disadvantage.
“So, the idea is to look at medium-sized corporates so that they can be scaled up to become larger corporates because you don’t want an economy that is dependent on a few large corporates.”
Minofu said the idea behind the IFC is to identify medium-sized corporates keen on expanding their businesses.
She said IFC’s support comes in two ways, advisory and investment support. Minofu said they have a number of investments such as debt and equity that can be utilised.
She explained they are hoping that by working with medium-sized companies from the beginning, ensuring they are structured appropriately, there should be significant growth coupled with a return on investment.
In financing SMEs, she noted there have been challenges with credit infrastructure that prevents the financial sector from fully engaging small businesses.
Minofu said as part of financial inclusion drive, they are looking at access to finance, especially SMEs.
“These SMEs face challenges in access to security which the banks need and most of them don’t have proper credit worthiness reporting.
“Therefore, in partnership with the Reserve Bank of Malawi, we have set up credit reporting and movable collateral systems, away from fixed assets to things like movable machinery,” she said.
Other than concentrating on small businesses growth, Minofu said the IFC also focuses on supporting agri business growth with special interest on other export- oriented cash crops such as macadamia and coffee.
Noting that the private sector faces a myriad of challenges in dealing with the public sector players, Chakwera under his Presidential Delivery Unit launched the private sector labs to achieve private sector-led economic development.
The labs will be ongoing throughout this week till Friday when they will officially close with a roadmap for future constant engagements on agreed actionable points.
In a statement, Malawi Confederation of Chambers of Commerce and Industry president Lekani Katandula said high electricity tariffs make the country’s industries less competitive and undermine job creation efforts.
He said they would prefer government to subsidise production than consumption because lower operating costs of businesses would lead to industry expansion, creating jobs and wealth in line with Malawi 2063, the country’s long-term development plan.
Katandula said: “We need to promote industries that produce products locally to reduce our appetite for imports.
“Besides saving foreign exchange, it is clear that we will create the much needed jobs.”
United Nations Development Programme resident representative Shigeki Komatsubara observed that SMEs remain the bedrock of the country’s private sector, contributing 40 percent to gross domestic product and generating about 83 percent of national employment.
He said large enterprises also strive to continue growing and contributing to industrialisation.
Said Komatsubara: “However, manufacturing still contributes only 11 percent to the GDP of Malawi.
“More can be done if we all work together to deliver on the aspirations of the nation and to support the power of the private sector.”
But he noted that many bottlenecks such as access to capital and credit, access to foreign exchange as well as access to steady and affordable energy supply.