Examining Barriers to SME’s Access to finance: A Qualitative Review of Credit Guarantees in Malawi

Abstract

The study examines the implementation of credit guarantees and how their barriers affect small and medium enterprises' (SMEs) access to finance in Malawi. The study reviews widely existing literature from academic research, policy frameworks, and reports from governmental and nongovernmental bodies. Additionally, the study uses primary data collection methods, in which interview and survey techniques are applied to cover the whole spectrum of stakeholders: SME owners, financial institutions, government functionaries, and development partners. This study uses a qualitative approach to examining how credit guarantees affect small businesses' ability to access capital and how well they do after it. Qualitative techniques include thematic coding of interview transcripts and policy documents, and quantitative techniques include using statistical tools. In so doing, the paper brings to light credit guarantees, which are essential in broadening the financial horizons of SMEs in Malawi. Major barriers to accessing finance include a lack of collateral, poor credit history, and exorbitant interest rates which become stumbling blocks for SMEs to secure loans from mainstream financial institutions. It further identifies the critical role of government policies and programs in supporting SMEs' financial inclusivity and offers measures to enhance credit guarantee mechanisms' effectiveness.