Managing risks key for SMEs survival, says firm
Business Partners International Malawi has urged small and medium enterprises (SMEs) to proactively manage risks to survive the turbulent economic environment characterised by cost of living crisis, high inflation and interest rates.
The firm’s country manager Akuzike Kafwamba in an interview on Wednesday outlined four steps, namely doing groundwork, upgrading financial department, developing a strategy and regularly reviewing reports, to manage the risks.
He said: “All SMEs should have policies in place that mandate thorough risk assessments for all new clients.
“This includes checking credit scores and credit reports as part of the onboarding process.”
Kafwamba also said data analysis tools have evolved, with various cost-effective solutions and tools available to help businesses analyse and monitor accounts.
He said in-depth data analysis can help SMEs to predict possible payment problems with clients before they happen based on previously observed patterns.
Kafwamba said SMEs should have payment plans and strategies prepared in the event that a customer might have trouble repaying a debt owed to the company.
He called for the development of possible worst-case scenarios as well as solutions to implement if a customer is at risk of defaulting and also train the accounts team to make use of these strategies when required.
“Business owners may be in the habit of shifting focus away from outstanding accounts, choosing instead to spend the bulk of their energy on new business,” said Kafwamba.
In a separate interview, Chamber for Small and Medium Enterprises executive secretary James Chiutsi reiterated that access to capital has always been a challenge for most SMEs.
“As a result of this challenge, many businesses have not grown to the levels that they have wanted to be.
“We hope that with such financiers as Business Partners International targeting small businesses, we can grow and thrive on the market.”
A recent Reserve Bank of Malawi Financial Stability Report stated that loan standards and conditions are tight, making credit expensive or unreachable for some with many turning to expensive and strict borrowing conditions by commercial banks.
Results of the survey show that six out of eight banks maintained tight credit standards and conditions for approval of loans while two banks indicated that they had tightened further the standards and conditions for approval of loans. n
