Is the quality of financial products attributes a cause to constrained capital access by smes in malawi?

Abstract

The need to accelerate the pace of growth of SMEs in Malawi is of paramount importance for economic growth. This study assesses whether attributes of financial products are a constraint to capital access by SMEs in Malawi. The main objective was to determine if product attributes of SME tailor made products in Malawi are structured in such a way that they create a constraint to access of finance and to analyse the successes of these purposeful funding schemes. Apart from conducting a detailed literature review, the research collected secondary data from financial institutions and banks which was analyzed using Excel as a tool to compute tables and graphs that were used to arrive at the conclusions. The results of the analysis show that over 60% of collateral requirements by FIs and banks remained the major impediments for SMEs to access finance in Blantyre. The study concludes that although the other product attributes posed no constraint or insignificant constraint to access credit to SMEs, there are still a number of factors embedded in the attributes which need to be improved to augment access of credit. Therefore, the study recommends to the financial institutions, and the RBM as supervisor of FIs, to consider including affordable collateral products than what is currently emphasized.