MSMES PONDER OVER SACCO FORMATION TO SOLVE ACCESS TO FINANCE CHALLENGES!

Introduction


Micro and Small Medium enterprises (MSMEs) in the country continue to face challenges on access to finance. FINSCOPE surveys done in the country have shown that lack of adequate finance by MSMEs continue to be a stumbling block towards the growth of such enterprises and to an extent the growth of the economy. Prohibitive conditions such as collateral requirements, exorbitant interest rates and a rigid repayment schedule have worked to the disadvantage of many SMEs participating in the formal financial sector. Faced by such challenges, SMEs in the southern region of Malawi have come together to explore the possibility of forming a SACCO with financial services that are friendly to SMEs.


What has happened so far?

In lamenting their common challenge of financial exclusion SMEs used to complain on SMEDI South social media platforms about issues they are facing when they approach formal financiers for funding. These cries led them to come together and approach SMEDI to facilitate linkage to information that can help to form a SACCO. On its part, SMEDI managed to organize an information dissemination meeting between SACCO and interim leadership of the MSMEs at Chilembwe Lodge on 6th May 2022. During the meeting, several issues were discussed including mobilizing more members so that the mandatory minimum number of 300 members is reached. During the meeting it was further agreed that the interim leadership will seek new members even in the central and northern regions of Malawi.

What the SMEs themselves have said?

“We are determined to drive this agenda and see to it that we have a SACCO that is friendly and serves the interests of all SMEs in the country.” said Madam Fiskani Phiri, one of the interim leaders of the group. ”I am calling on all SMEs in the country to embrace this idea and join us. Together, we can form an institution that provides affordable capital to our businesses on terms that have been developed by the recipients of such capital” she concluded.

What has SMEDI said?


“We, (SMEDI) neither form SACCOs nor do we intend to own one.” said Mr. Edward Chilima, Director of Business Information and Training at SMEDI.” However, when you see what these SMEs want, it is simply a way of accessing finance. What our institution is doing is simply supporting the idea that will ensure more SMEs in the country access formal and affordable financing. Facilitating access to finance is within our mandate and we will support anything that helps us achieve our mandate” concluded Mr. Chilima.


Has such an arrangement worked elsewhere?

A SACCO is like any other cooperative. The only difference is that it is a financial cooperative. Being a financial cooperative entails that a SACCO is a cooperative that seeks to meet financial needs of its members. Malawi has many SACCOs that are currently serving the needs of their members. Indeed names such as Mudi SACCO, Msilikali SACCO, Sunbird SACCO are well known to many Malawians. Based on how successful some of these SACCOs have been, gives hope that an MSME focused SACCO is possible in Malawi. After all, statistics shows that Malawi has over one million SMEs and for a SACCO to form it needs a minimum of 300 members.




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