FInES: Project: Bridging the Gap to Access to Finance in Malawi

In Malawi, micro small and medium enterprises (MSMEs) face numerous challenges such as lack of access to finance, low capacity and lack of access to markets; yet they have a significant potential to contribute towards economic growth. 

During 2019 to 2021, small scale businesses suffered from the impact of the Covid-19 pandemic which led to a close down of most businesses resulting in job losses. The 2019 FinScope Survey estimated that 89 percent of employment in Malawi is in the informal sector. The survey also revealed that only 10 percent of medium enterprises, 5 percent of small enterprises, and 3 percent of microenterprises had accessed credit from a commercial bank. 

The Financial Inclusion and Entrepreneurship Scaling (FInES) Project which is funded by the World Bank seeks to address some of the challenges that MSMEs are facing such as lack of finance, lack of appropriate technological infrastructure and awareness. The total funding for the project is US$86 million. The project is built around three main pillars: increasing access to financial services, promote entrepreneurship and capabilities of MSMEs and enhancing financial infrastructure in Malawi.

According to Dr Mark Lungu, the Project Manager for FInES Project, the FIneS loans are provided to businesses at a lower interest of 11 percent per annum with no arrangement fees through commercial banks and at less than 4 percent per month from microfinance institutions. He indicated that the project is working with financial institutions namely: NBM Development Bank Limited, NBS Bank, MyBucks Banking Cooperation, Standard Bank, Malawi Agricultural and Industrial Investment Corporation (MAIIC), COMSIV Limited, National Economic Empowerment Forum (NEEF) Limited, Microloan Foundation Limited, Saile Financial Services Limited, FINCA Malawi, Wealthnet Finance Plc, CUMO, Vision Fund. These institutions receive funding from the Reserve Bank of Malawi through the FInES Project for on-ward lending to micro small and business enterprises. 

The Impact
Tamani Mbukwa, 37, had a dream of building a state-of-the-art studio that would offer a wide range of products and services that would contribute to people’s mental health and physical wellness.

He invested K160 million into the project which started in 2015. When the country was hit by Covid-19 pandemic, everything came to a standstill. His business was barely breaking even. The construction project ended prematurely, and became stagnant for almost two and a half years. He did not know where he would get the remaining money to finish the project.

In 2021, when NBM Development Bank Limited told him of the FInES loan he did not hesitate. He applied for the loan and was given K50 million to resuscitate the construction of his magnificent two-storey building located in the outskirts of Chilomoni in Blantyre.

“The FInES loan made me to realize my dream. I named it Studio 24 because 24 symbolizes continuity. I called it Studio to mean a creative and entertainment hub that is available in all seasons of the year,” Mbukwa said smiling.

“I saw the need for entertainment, because most young people are involved in drugs and some become depressed because of lack of entertainment,” he said.

According to Mbukwa Studio24 aims to promote mental health awareness, and physical activity lifestyle, through engaging the community in stress management programs. Apart from promoting mental health among young people the studio also aims to showcase talent among young people.

The studio has two events spaces, with one of them dedicated to under aged teenagers, as a way of restricting alcohol consumption among the young people.

Mbukwa however says the scarcity of foreign exchange is affecting his businesses as it is very difficult to purchase some products.

His advice to young people is not to procrastinate whenever they have a business idea

“You are never too young to start. The longer you have been at doing a certain business or any other activity, the better you become at it. Mastery of your business or talent, is what will inevitably bring you success. Therefore, whatever idea you have in your mind, start now,” concludes Mbukwa.

NBM Development Bank Limited General Manager, Bernard Masi, says the Bank finances projects in the agribusiness (both agriculture mechanization and value addition), Energy, Tourism, Education, ICT, Structured Mining and Start up Manufacturing Sectors. 

According to Masi, NBM Development Bank Limited got the first tranche of K300 million in February 2022, a second tranche of K2.7 billion in July 2022 and a third tranche of K5.0 billion in February 2023. The Bank is in the process of disbursing a total of K4.5 billion to 31 customers undertaking various projects. The major sector that has benefitted from the loans is agribusiness followed by Tourism and Health.

“In order to encourage the culture of paying back loans, we are emphasizing the adage ‘skin in the game’ this means that an entrepreneur should have something to lose in any business that the Bank finances and this motivates the entrepreneur to work very hard. It also promotes a culture of risk sharing with the Bank. And so far, we have not had any problems with Nil Non Performing Fines Loans,” Masi explained.

NBM Development Bank Chief Operating Officer, Esnat Kamudoni also adds that most of the projects which have been supported with FinES loans are creating jobs on the market.

“For example, we have a corn puff manufacturing company which has created 30 jobs and Studio24 in Chilomoni employing over 20 people,” explained Kamudoni.

Since the project started in 2021, it has reached out to over 32,000 MSMEs. Out of these, 46% are women and 42% are men and 12% are youths. A total of USD32 billion has been disbursed to PFIs and K27 billion has been disbursed to MSMEs.