An assessment of financial factors leading to the failure of micro and small enterprises (mses) funded by micro finance institutions in Malawi: the case of Finca Zomba clients

Abstract

The growing importance of micro and small enterprises in development, poverty reduction and livelihood strategies in developing economies where paid job opportunities are limited cannot be underestimated. One notable development is that most of the Micro and Small Enterprises in Malawi fail due to the impact of financial factors. This study assesses the financial factors that lead to the failure of Micro and Small enterprises funded by Micro Finance Institutions in Malawi using data collected from FINCA Malawi, Zomba Branch clients. The results show that indeed these financial factors have a negative impact on the operations of micro and small enterprises leading to their failing. While there are no significant differences in the impact among the factors, the results, however, show that factors like, unarranged loan repayment period, country‟s economic elements, and low money supply were among the ones rated highly on their impact. The findings will assist policy makers (Government), development agencies (lending institutions - MFIs) and business organisations (Micro and Small Enterprises) to develop appropriate strategy to improve the MSE sector in terms of failure. As such a call has been made on the Government‟s intervention on policies and conditions governing the protection of the MSE sector.