Abstract:
Since the 1980s, microcredit schemes have increasingly become a popular
policy instrument for supporting small-scale enterprise development agendas
in developing countries. This notwithstanding, the efficacy of public sector
intervention in microcredit provision has not received much scholarly
attention in Malawi, as existing studies have focused on actions by private
microcredit institutions (MCIs). Thus, while policymakers highly regard the
perceived efficacy of public MCIs, the subject is rarely exposed to empirical
questioning. This paper reports on a study that used a welfarist approach to
assess whether public MCIs enhance small-scale enterprise development. The
study used Q methodology to collect and synthesise primary data from 21
National Economic Empowerment Fund loan clients in Lilongwe District.
Findings revealed that smaller loan sizes, absence of grace period, diversion
of loan proceeds towards spending on household necessities, physical
collateral requirements, and other often-not-documented costs negate the
envisaged enterprise development claims of microcredit schemes. These
findings suggest the potential failure of public microcredit to achieve the
intended enterprise development goals because similar access barriers
existing in conventional private credit markets remain rooted in current
public microcredit schemes. The paper calls for practical policy action
addressing these bottlenecks that alienate the very people who require
financial inclusion.
