Challenge
More than one-third of Malawi’s population lives below the poverty line and millions of people face acute food insecurity. The vast majority of adults work as smallholder farmers growing maize, sweet potatoes, bananas, and other staples. But most of these farms exist outside of the formal economy, and often lack the collateral required to access loans. Similarly, there are an estimated 1.1 million micro, small, and medium-sized enterprises (MSME) in Malawi that employ about 20 percent of the adult population, but like the smallholder farms, these businesses are constrained by limited credit. According to the World Bank, only 5 percent of small enterprises and 3 percent of micro-enterprises in Malawi have credit from a commercial bank.
Solution and Impact
A $5 million DFC loan portfolio guaranty in collaboration with USAID/Malawi is helping NBS Bank increase lending to micro and small businesses in Malawi. NBS Bank, an award-winning bank with 25 branches across Malawi, employs women in almost half of all senior management positions and is seeking to diversify its portfolio beyond corporate and retail banking by increasing lending to MSMEs. Half of the lending is earmarked to agriculture, clean cooking, fisheries, and sustainable forestry. NBS Bank and the supported MSMEs will also receive USAID technical assistance.
The loan guaranty advances the Malawi Growth and Development Strategy, a five-year plan for the country’s development, which has identified support for MSMEs and diversification in the agriculture sector as priorities. By focusing on loans in the agriculture sector, it will also help address the country’s chronic food insecurity.
Since the guaranty was made effective in 2022, the Malawian Kwacha equivalent of more than $3 million has already been loaned to 114 small businesses, 70 percent of which are first-time borrowers and nearly 25 percent of the loans are to women-owned businesses.
This project was profiled in 2024.