Fines project loans capital access for SMEs
Amid difficulties to access affordable financing for business capital among small and medium enterprises (SMEs), a World Bank-funded project that subsidises loans has exposed the need for a policy to boost small businesses.
The $86 million (about K151 billion) Financial Inclusion and Entrepreneurship Scaling (Fines) project has touted its low-cost loans which has seen businesses flourishing with increased production output and job creation.
For example, Thanthwe Enterprise, a Lilongwe-based agri-processing venture, acquired a tea processing and packaging machine that enables it to export hibiscus tea and other herbal drinks while increasing its share on the local market.
The firm further up-scaled its greenhouse manufacturing capacity through the K350 million loan it accessed from NBM Development Bank, strengthening its establishment as an off-taker to over 2 000 farmers producing various high-value crops.
“We now have the confidence to approach the market knowing that we will be able to supply the required quantities,” said Ngabaghila Chatata, the firm’s managing director and founder.
She said the low-interest rate loan levied at 11 percent per annum against the commercial rates of between 30 and 40 percent, helped the firm to boost its output and is planning to penetrate the export market.
In Mchinji District, the Fines project through a local development finance institution Malawi Agriculture and Industry Investment Corporation (Maiic) also supported the Mchinji Savings and Credit Cooperatives (Sacco) with a K100 million loan that enabled the microfinance institution to increase its loan disbursement capacity.
It also improved access to finance for its members that includes 5 000 farmers and 2 000 salary-based members.
Mchinji Sacco general manager Michael Mangani said in an interview on Wednesday that they have a loan demand in excess of K1 billion.
Fines financial services development specialist Hastings Mzoma said in an interview on Wednesday that the project shows how government intervention can help to address cost of capital and access.
“We know that we have all the opportunities in Malawi, which can help to transform the country,” he said.
A member of Mchinji Sacco Eliah Kholowa said, through their business group, they doubled their loan to K3 million and has grown soy beans, maize and cassava.
The five-year Fines project has disbursed $82 million (about K143 billion) out of the total project budget of $86 million (about K151 billion).
The project has reached out to 1 268 SMEs, beating the target of 1 000, according to a project brief.
