Access to finance key to growth—IFC

About 47 percent of firms in Malawi experience problems of accessing finance, consequently hindering private sector growth and retarding job creation, the International Finance Corporation (IFC) has said.

IFC, an arm of the World Bank, in the Jobs Study 2013 released recently, has pointed out a number of obstacles to the growth of the private sector and job creation. The report, however, highlights access to finance as a severe problem in Malawi and advises policy makers to take heed.

“A fundamental requirement for job growth is to remove the obstacles that prevent it. Business owners’ perceptions about the most important constraints they face provide a good indication what affects business performance. Thus, policymakers should focus on eliminating the biggest obstacle identified by firms. Obstacles differ significantly by country, and policymakers should consider the most binding constraints for companies in their specific context,” reads the report in part.

However, in an interview on Wednesday, Ministry of Industry and Trade spokesperson Wiskes Nkombezi said government is working on improving access to finance.

“We acknowledge that access to finance is a problem in the country, not only to big businesses but even to small and medium enterprises. It is our wish that we get rid of this problem. However, this might actually be a reflection of the economy as a whole. So far we have the Microfinance Act which is meant to regulate access to finance,” said Nkombezi.

The IFC report notes that access to finance is perceived as a particularly severe constraint in the Democratic Republic of Congo, where about 54.5 percent of the firms consider it their biggest obstacle, followed by Indonesia and Malawi, where about 47 percent of firms consider it as a bottleneck which is three times higher than the sample average of 16.5 percent.

In the 2013 Jobs Survey Report, IFC notes that joblessness, especially among the poor, is a global crisis. IFC argues that this results into poverty, and social and economic unrest. The private sector, which provides nine out of 10 jobs in developing countries, offers the best solution to the challenge of unemployment.

In November last year, the Malawi Confederation of Chambers of Commerce and Industry (MCCCI) also noted that access to credit is one of the biggest bottlenecks that businesses face in the country.

In the MCCCI 2012 Malawi Business Climate Survey, the chamber said 86 percent of the firms surveyed reported access to credit as a problem. MCCCI noted that ,there is need for the country to fast track the establishment of a development bank for long-term investments.