Abstract:
Successive governments in Malawi have consistently engaged in providing microfinance as a strategy for enhancing small-scale enterprise development for the last four decades. However, there is incoherent and partial evidence about the efficacy of this strategy on the poor (and financially excluded) borrowers. This study adopted a political economy approach to determine the extent to which public microfinance programmes achieve their intended enterprise development goals. A pragmatic research design was used to collect and analyse data from 95 respondents from Lilongwe, of which 16 were key policy actors drawn from the political cadre, government bureaucrats, the industry regulator, and donors, while 79 were public microfinance loan beneficiaries. A purposive sampling technique was used to identify these respondents. The data analysis used a combination of methods such as factor analysis, Gioia and thematic analysis. The key findings revealed that persistently high costs of accessing loans from public microcredit providers defeated the relevance of government intervention, and that most actors supported the programmes only for their political and economic interests rather than empowering the beneficiaries as formally conceived. Further, the study revealed that the potential efficacy of the loan programmes was compromised by the misalignment of loan disbursement with the seasonal nature of investments, small loan sizes, lengthy turnaround periods, and lack of due diligence. The study concluded that public microfinance programmes have achieved little towards their intended goals in the study sites. Based on the field evidence revealing that the beneficiaries took recourse to loans from village savings and loans groups as a coping strategy to support repayment of public microfinance loans, the main recommendation of the study is that the government should support the institutional strengthening and capacity building of these savings and loans structures as a more promising alternative microfinance model for the poor. Further, the study recommends that the Government’s role in microfinance programming should be limited to the regulation of private players to protect the poor from exploitative lending practices.
