The African Economic Research Consortium says only 15 percent of Malawian companies have a bank loan or line of credit compared to an average of 30 percent in sub-Saharan Africa.
Speaking at the Economics Association of Malawi (Ecama) 2025 Annual Economic Conference in Mangochi on Saturday, the consortium’s executive director Victor Murinde said this impedes the sector’s role as a primary driver of the country’s economic growth.
He said while strengthening the banking sector to lend to the productive private sector is key, reducing financial risks for critical sectors by implementing strategies such as credit guarantee schemes is also important.
Said Murinde: “Malawi needs a diversified financial structure for industry and trade and facilitate access to credit for small and medium enterprises [SMEs] through innovative financing mechanisms, credit guarantee schemes and support for financial inclusion initiatives.
“The role of the private sector is the beating heart that makes all the other elements come to life. SMEs constitute over 90 percent of all registered businesses in Malawi and are a significant source of employment.”
He said there is need to improve business environment and access to finance, incentives and industrial policy.
International Monetary Fund data show that value of government debt instruments grew by 78 percent year-on-year in 2024 while the growth in private sector credit was much more subdued at 30 percent and only 22 percent year-on-year through end April.
As at August 2025, Reserve Bank of Malawi data show that the annual growth rate of private sector credit accelerated to 40.6 percent in August 2025 from 38 percent in July 2025 and was higher than 28.2 percent recorded in August 2024.
On a month-on-month basis, private sector credit increased by K56.3 billion to K2.1 trillion primarily driven by increases in commercial and industrial loans, individual household loans and mortgage loans amounting to K69.8 billion, K16.8 billion and K6.3 billion, respectively.
In his presentation during the conference, Alick Nyasulu, an economist at Economic and Social Commission for Asia and the Pacific, said lack of access to affordable finance is one of the key challenges holding the private sector back.
He proposed the establishment of a functional SME Credit Guarantee Scheme to unlock capital for the job-creating engine of the economy.
On his part, Malawi Agriculture and Industrial Investment Corporation chief finance officer Thomson Kumwenda while proposing the introduction of specific dividend tax to fund development banks efforts, said there is need to encourage local development banks to lend, including passing minimum lending ratio to priority sectors.
He said that in China six years after Covid-19, they are still offering banking reliefs to industry.
Said Kumwenda: “There is need to encourage direct lending to banks with flexible collateral requirements beyond sovereign bonds and extended periods of up to 36 months and relaxation of macro prudential tools such as lowering the liquidity reserve requirement, countercyclical capital buffers regulatory breaches forbearance and liquidity coverage ratio.
“On regulation and supervision front, there is need to have temporary limits in credit directives that aim to support credit expansion to key growth sectors.”
Ecama president Bertha Bangara Chikadza observed that the private sector is not producing enough because of high cost of finance and lack of tailor-made loan facilities.
This year’s conference was held under the theme ‘Beyond the crises: Reshaping the economy’.
