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Effective MSME Strategy in Malawi

2014-02-25 · By Webmaster Business Fights Poverty

Effective MSME Strategy in Malawi

Micro Small and medium-sized enterprises (MSMEs) play an important role in the economy of many developing economies and Malawi is no exception. Evidence[1] shows small and medium enterprises make up about 1.7 million people, equivalent to 38% of Malawi’s total working age population. Women make up 46% of these employment figures – up 4% from 2000 – and contribute about 16% to Malawi’s GDP. Overall, this sector generates an income of 326 billion Malawian Kwacha (close to £462 million) making it a significant contributor to Malawi’s economy.

However, the recent global financial crisis created a particularly tough climate for MSMEs, with a reduction in demand for goods and services and a contraction in lending by banks and other financial institutions. This required a re-prioritisation, and the injection of substantial resources in terms of human resource, finance and infrastructure to adequately support SMEs. While there have been significant policy developments in Malawi to help SMEs, limited resources have meant not all of these strategies have been implemented as planned. It’s particularly important that resources are made available for entrepreneurship and enterprise development initiatives, to ensure not only that jobs are created but that wealth is generated and distributed to help address poverty levels. This is particularly the case in light of the global financial crisis and the resulting withdrawal of aid in some quarters.

KEY STRATEGIES FOR EFFECTIVE MSME PROGRAMMES

Malawi’s National Export Strategy is focused on three priority clusters to help offset the effects of the country’s trade deficit – namely oil seed, sugar cane and manufacturing. Despite this focus, the country maintains an over-dependence on traditional export crops like Barley Tobacco and further, remains a net-importer. An alternative strategy is therefore needed that would allow Malawi to transform the economy and ensure greater benefits to more people – and thus achieve its goals of wealth creation, sustainable economic growth and economic empowerment as laid out in the Malawi Growth and Development Strategy (MGDS).

If this vision is to be achieved there ought to be a deliberate effort to ensure a balance between relevant design of policies and appropriate interventions. New strategies are needed; strategies which recognise where many Malawians are employed and where economic empowerment of local people is a possibility. The MSME sector is central to this.

Designing a MSME policy that ensures substantial resources are allocated to priority interventions, while formulating a strategy that focuses on private sector export led growth, will help in achieving sustainable economic development for Malawi. Similarly, MSMEs themselves are likely to require very hands on support. Business incubation services that nurture MSMEs into established and successful enterprises, alongside services to help improve their productivity, will aid businesses to in turn contribute increased amounts of employment and GDP. Using local resources and technologies to support the development of products that are in demand in Malawi, and then providing the appropriate infrastructure and factory shells to support improved product design, labelling and standards, will recognise and encourage further entrepreneurship, innovation and creativity.

EXPECTED OUTPUTS FROM THE STRATEGIES

Adopting such strategies is likely to lead to an enhanced entrepreneurial spirit among Malawians, especially the younger generation. It will also work towards the development of the small enterprise sector into a highly skilled and competent industrial base with the potential for increasing value added products for both local and export markets. This in turn is likely to increase the contribution to Malawi’s GPD made by the MSME sector and lead to a diversification of Malawi’s manufacturing and export sector. These strategies would also help deliver an improved policy and regulatory environment, necessary for a competitive MSME sector, better infrastructure and support programmes for small businesses and increased job opportunities for the people of Malawi.