Empowering businesses through partnership

Business Partners (Malawi) in mid July launched a multi-billion kwacha business development scheme for small and medium enterprises. The Nation Deputy Editor I (AM) spoke to Business Partners (Malawi) country manager Fosters Kalaile (FK) to get more insights into the scheme. Excerpts:

AM: You are managing a $10 million (about K4 billion) small and medium enterprises (SMEs) loan fund. How different is your product from others that have existed and still exist on the Malawi market

FK: Provision of patient capital where we invest and expect repayments based on realistic business cash flow over longer periods of time makes us different. Besides, we have the ability to provide both debt and equity; additional value adding services where it is not just about providing finance, but having a separate secondary, dedicated fund, at no interest, for consulting and technical assistance services.

We at Business Partners are able to provide long-term finance which can stretch for a period of five years and as far as 10 years for property development.

Our product offering is not strict on own contribution. There is provision in the loan amount to pay for the legal costs to establish security, valuation fees, insurance costs and other financing costs which most conventional financiers expect the entrepreneur to pay themselves.

Each entrepreneur’s financing need is assessed based on the risk of the business and a solution is tailor-made to creatively follow the businesses cyclical earnings.

AM: Will you briefly outline the terms and conditions for one to qualify as a beneficiary for the scheme?

FK: We, at Business Partners consider the following issues before providing financing.

Firstly, a business should have been in existence for the past two years, a period that can provide a track record in terms of market experience, product knowledge, competition. In fact, this is outlined in a business profile.

Two years historical financials [audited for limited companies] supported by a year’s projected cash-flow [additionally, actual monthly sales figures and costs for the past year supported by bank statements].

Start up financing can be considered only for high impact projects with job creation prospects only for entrepreneurs who have got some proven experience in the new venture.

We are not keen on primary agriculture, on-ward lending and tobacco sectors and any illegal activities.

Investments should be in the range of between K20 million and K410 million.

The loan durations are five years for normal loans and 10 years for property development. Interest varies on risk so each deal is priced differently

AM: Many SMEs mention lack of capital as one of the challenges hindering their growth. But during the presentation by Business Partners International at the launch, it was argued that management is another key challenge. How do you plan to bridge this capacity gap?

FK: We address the challenge by providing technical assistance to support the management team.

Our Technical Assistance Fund, which is at no interest and is repayable over an agreed period with entrepreneurs, is meant to provide support for general business technical and consulting services, specialist technical assistance and consulting, industry specific technical assistance and consulting and turnaround management [Not for already troubled businesses, but those businesses we finance, but experience problems along the way].

AM: They say there is no free lunch. What is the cost of your loan products compared to similar ones on the market?

FK: You are right, there are indeed no free lunches, even at Business Partners.

BP is not a non-profit making organisation. We operate on a commercial basis and we would like to be profitable and sustainable by doing good to Malawi’s economy, but doing it well through a sustainable and yet fair offering.

BP is a risk financier, so if we are taking on a big risk, we would obviously want to be compensated adequately for taking on the additional risk.

AM: So far, what has been the response to the scheme since the launch?

FK: The response has been very positive and overwhelming. The objective of our fund is to provide alternative financing to medium to large entrepreneurs and the launch was meant to raise awareness to entrepreneurs that there is an alternative financier to the conventional lenders.

The launch has obviously drawn a lot of interest from the micro businesses who we believe are already catered for through other organisations such as Pride Malawi, Finca and Opportunity Bank.

AM: What is the ownership structure of Business Partners?

FK: Ownership of Business Partners International comprises Business Partners Limited (South Africa), International Finance Corporation (IFC) of the World Bank, FMO, Stitching Doen, Proparco and the African Development Bank (AfDB).

AM: Who is Fosters Kalaile?

FK: Fosters Kalaile is the third-born child of retired judge of the Malawi Supreme Court of Appeal James Kalaile and Mrs Mary Neffie Kalaile. I have three siblings, [one brother, James and two sisters: Tamara and Chifundo]. I am divorced, with two children Asante Violet and Atupele James.

I graduated with a bachelor of science degree from the University of Malawi with credit in 1997. In 2007, I graduated with a master’s degree in international relations and development finance from the University of East Anglia, United Kingdom.

In 2012, I was awarded the ACCA [Association of Cerfited Chartered Accountants] post-graduate diploma in financial management. Currently, I am studying for a certified financial analyst (CFA) programme.

AM: What have been some of your major achievements?

FK: I was awarded a business banking excellence in sales while working at Standard Bank in 2010.

AM: What inspires you?

FK: The act of being able to pick myself up when life knocks me down. There have been a few times that I have taken a knock, but have dusted myself off, held my head up high and moved on.