Over the past decade Malawi has experienced volatile economic growth as a result of unfavourable weather and political unrest. It is reported that a third of the Malawian population was affected by a drought that exacerbated already fragile food security. The drought also stunted development in agriculture, which is the main source of economic growth.
High levels of poverty persist, with 70% of Malawians living on less than USD 1.9 per day. The key driver of growth and employment in Malawi is the MSME sector, which consists of 1.1 million businesses employing 1.8 million people (~20% of the adult population). The wholesale and retail sector accounts for about two-thirds of MSME business activities at 69%, followed by the agricultural sector with 17%. Given the overall economic importance of the sector, a thorough understanding of the market dynamics is key to guide development in the coming years.
The last survey of MSMEs in Malawi was conducted in 2012. The country faced a different macroeconomic environment then, with inflation at 22% and the economy growing at 2%. Despite the government’s efforts in developing MSME policies and provision of financing, capacity development and business support, there has been limited MSME growth and development in the country. The government sought to address this by constituting an MSME reference group chaired by the Ministry of Finance, Economic Planning and Development (MoFEPD) and consisting of local MSME finance and business development support providers, as well as international development partners. MoFEPD commissioned an update on this MSME study to identify what additional support was required.
Genesis, in partnership with FinMark Trust, was commissioned to conduct this study, which adopted the Making Access Possible (MAP) methodology. This methodology entailed carrying out an evidence-based diagnostic study of the country context, demand-side, supply-side and policy and regulatory factors affecting MSMEs to identify key barriers and opportunities in the market.
This process entailed FinMark Trust conducting the demand-side research and Genesis carrying out the supply-side and policy and regulatory analysis, which formed the basis of the diagnostic report. The key findings from the diagnostic report and roadmap were played back to the reference group for validation before developing an implementation roadmap. The roadmap provided practical steps and targets to guide the development of Malawi’s MSME sector by focusing on key drivers of change.
Ultimately, the MAP diagnostic and roadmap empowers the Malawian government and donor partners to align their programming and ensure that decisions to support MSMEs are developed off the back of a strong evidence base. Through this, Malawi is better placed to ensure stronger economic growth and employment outcomes.
The MAP Malawi MSME diagnostic and roadmap was launched on 4 June 2020 with various government and donor partners in attendance. The full suite of documents can be accessed here: