Small and medium enterprises (SMEs) in Malawi must maintain strict financial discipline and stay focused on their core business to survive the current volatile economic environment, Business Partners International (BPI) Country Manager Bond Mtembezeka has said.
Mtembezeka identified three key challenges preventing small businesses from evolving into emerging corporations.
The bottlenecks include inadequate funding, lack of technical knowledge and poor financial management.
He notes that beyond collateral constraints, many entrepreneurs launch businesses without proper planning or market understanding, thereby limiting their growth potential.
“SMEs usually operate with very thin balance sheets, which prevents them from accessing funding from traditional lenders. Many times, someone will just wake up one day and say, ‘I want to do business’, but if you ask them if they understand what they’re venturing into, if they have a business plan in place, or where they see themselves in five years, you realise they lack the technical knowledge.
“There is also a growing trend of fund diversion among SMEs, where entrepreneurs redirect business funding to personal expenditures, ultimately leading to business failure. Even when SMEs secure funds from financial institutions or investors, poor financial management often derails their growth trajectory,” Mtembezeka said.
His observations come at a time Malawian businesses are grappling with high inflation, currency depreciation and limited access to forex, making it crucial for SMEs to maintain financial discipline.
In a recent interview, Malawi Union of Small and Medium Enterprises President Barbara Banda challenged the government to ensure long-term solutions, particularly regarding fuel access and foreign currency scarcity, to ensure that SMEs were thriving in the country.
However, she was confident that the situation would improve considering strides made in 2024.
Banda cited the passing of the Micro, Small, and Medium Enterprise (MSME) Bill in Parliament.
President Lazarus Chakwera later assented to it.
