Amid Covid-19 economic hardships, the surge in demand for National Economic Empowerment Fund (Neef) soft loans aimed at inducing economic activity rose for both individual businesses and small and medium enterprises (SMEs).
In 2020, Ministry of Finance rebranded the Malawi Enterprises Development Fund to Neef to economically empower ordinary and under-served Malawians, particularly women, youths and persons with disabilities through provision of quality, affordable and sustainable microfinance services.
As at November this year, Neef had run out of sufficient funds after disbursing K20.3 billion and its management had lobbied parliamentary committees to ensure Treasury funds it with K30 billion.
Parliamentary Committee on Commissions, Statutory Corporations and State Enterprises deputy chairperson Bintony Kutsaira said Neef is underfunded, as such majority of the loan seekers were not being serviced.
He said: “In our engagement with Neef management, they have revealed that they need K30 billion to reach out to many people seeking loans out there. Government promised to capitalise Neef with K75 billion and we will inquire about this in Parliament.
“The demand for loans is huge in all the constituencies nationwide, members of Parliament should take this as a serious issue and ensure Neef is adequately funded.”
Economist Milward Tobias, who is executive director of the Centre for Research and Consultancy, said a capital injection of K20 billion in the economy through SMEs was significant and can make impact on livelihoods of beneficiaries and the economy.
However, he said the extent to which the investment makes impact depends on the quality of businesses that beneficiaries do, adding that the country has had loan facilities for small businesses for a long time, but the impact is too negligible to be noticed.
Tobias said: “We need a mechanism to track that there is graduation to next level of business. How many small-scale businesses which are supported have graduated to medium and how many medium-scale businesses which are supposed to graduate to large-scale after some years.”
He said the status of small businesses should not be glorified as if that is the desired state, adding that they must graduate.
In an interview, Malawi University of Business and Applied Sciences economics professor Betchani Tchereni explained that equalisation through small-scale loan disbursement is important to curb inequalities.
He said to assist the country to achieve self-sufficiency, everyone must be involved.
“When there are inequalities of opportunities, the development will be seen as skewed and this may increase conflicts and poverty in some areas may be higher than others,” Tchereni said.
In April 2021, President Lazarus Chakwera expressed displeasure with how Neef loans were being disbursed, saying he received complaints from businesswomen and youths about how prohibitive the loan scheme was.
He said: “We created Neef to be a bridge not a barrier. I expect the Minister of Finance to work with Neef and the local banks on these issues and devise solutions, including new and sustainable ways of funding the programme.
“I will not abide by the notion of going into the next fiscal year with the problems in the design of the Neef programme that people are complaining about this year.”
Chakwera said issues must be resolved to “fertilise Malawi’s entrepreneurial soil for businesses to thrive”, especially in view of the way business has suffered under the Covid-19 pandemic conditions.
He said the purpose of restructuring and rebranding the microfinance institution was to depoliticise it by ensuring sound management.
Neef loan products targeting women and youth groups have a monthly 2.5 percent interest, 3.5 percent processing fee and 1.5 percent insurance fee.