Access to Entrepreneurial Finance in Malawi: Challenges and Opportunities for Start-Ups

Abstract

This study explored the challenges and opportunities surrounding entrepreneurial finance in Malawi, with a focus on enhancing start-up access to funding. The study was conducted at area 25 in Lilongwe, Malawi due to the proximity of place of residence for the researcher. The research utilized a mixed-methods approach, combining a survey of over 100 start-up founders and semi-structured interviews with 15-20 key stakeholders, including entrepreneurs, financial institutions, and policymakers. Quantitative findings indicated that high-interest rates (reported by 82% of respondents), collateral demands (76%), and limited funding avenues are primary barriers to financing. Additionally, the data reveal that family loans (44%) and microfinance institutions (31%) are the predominant funding sources, with limited utilization of traditional banking and venture capital options. Financial literacy among entrepreneurs was also low, with only 37% demonstrating adequate financial knowledge. Qualitative narratives offer a complementary view, with stakeholders emphasizing the reluctance of banks to fund start-ups due to high perceived risks, alongside a cultural tendency toward risk-aversion in investment. However, digital finance emerged as an area of opportunity, with interviewees highlighting mobile banking as a promising solution for rural entrepreneurs. Participants acknowledged government support initiatives but recommended expanded access and improved program design. The findings underscore the need for policies that reduce regulatory burdens on start-ups, encourage private sector engagement, and foster financial literacy training. This study contributes to the literature by providing an integrated perspective on financial inclusion barriers for entrepreneurs in Malawi and suggests that future research should investigate the long-term impacts of digital finance and policy reform on start-up viability and growth.

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