Matching fund could create large firms

economics professor Ben Kaluwa says the Business Linkage Matching Fund (BLMF) has the potential to create huge companies out of small and medium enterprises (SMEs) if well implemented.

The BLMF is a competitive facility through which linkages between big businesses and SMEs or cooperatives are created to build capacities of small businesses to grow and become reliable suppliers to large enterprises.

The fund, an initiative of the African Development Bank (AfDB) with technical support of Ministry of Industry, Trade and Tourism, provides matching grants of up to $20 000 (K14 million) to eligible applicants to grow their businesses.

This is part of the Competitiveness and Job Creation Support Project (CJCSP), being spearheaded by the ministry to reduce poverty through private sector development and increase competitiveness in the private sector through increased diversification and job creation.

Kaluwa, who teaches economics at Chancellor College, a constituent college of the University of Malawi, said on Tuesday BLMF is a good programme which needs to be upgraded as it can help to grow the middle class.

He said: “Our colleagues in Kenya, Uganda and Botswana took this route and today they have a thriving middle class. We should try our best to move SMEs to higher levels because that is how we can grow the economy.”

Kaluwa said growth of SMEs could help in job creation and increase the government’s tax base thereby helping the country to meet some of its obligations with ease.

Wiskes Nkombezi, Ministry of Industry, Trade and Tourism assistant director of trade, said BLMF if implemented properly, has the capacity to transform SMEs which could contribute greatly to the country’s gross domestic product (GDP).

“Most of the big corporations in operation today started small but they grew because of good strategies and hard-working members of staff.

“Despite the fact that the fund does not provide working capital, funding can be used to buy essential equipment or pay for business linkages,” he said.

Nkombezi, who is also the ministry’s spokesperson, said government believes that when large enterprises work closely with SMEs or cooperatives in an organised manner, the benefits are far reaching for both parties.

“If you are an SME or a registered cooperative forge partnership with a large company, chances of growth are high,” he said.

Government has recently been inviting concept notes from interested registered SMEs and cooperatives engaged in value addition, processing and marketing to develop business linkages with large enterprises to be considered for funding.

Since the BLMF provides matching grants, project promoters are asked to provide 50 percent of hardware investments and 20 percent of technical assistance or training costs as their contribution.

Proponents of BLMF say it has the potential to incentivise large businesses to provide embedded business development services to SMEs to build capacity among their suppliers and distributors.

It also encourages big businesses to contract out parts of their businesses and support small businesses to provide new goods and services required by large enterprises. n