The Government of Malawi, with support of the World Bank is implementing the Financial Inclusion and Entrepreneurship Scaling (FInES) Project, which is aimed at increasing access to financial services, promote entrepreneurship and capabilities of MSMEs in Malawi including addressing Covid-19 implications. The project is designed within the context below.

The country’s stable macroeconomic indicators in recent years are set to be disrupted by the Covid-19 global pandemic.  Trade disruptions due to Covid-19 outbreak, a decline in imported food products and in-country mobility restrictions, and potential speculation or market distortion and possible exchange rate depreciation could escalate prices of imported goods and induce an upward push on the country’s inflation. Good economic performance in 2019 was expected to continue in 2020; however, due to the potential impact of Covid-19, real GDP growth estimate for 2020 has been revised downward from 4.8 percent projected for the year earlier to 2.0 percent for the year.  The Covid-19 outbreak poses downside risks for the economy and, in an adverse scenario, could lead to an economic recession.  If the virus spreads extensively in Malawi and aversion behavior increases and/or market and trading restrictions are imposed, it could severely reduce trade and business activity. Transport, tourism, accommodation and food services, wholesale and retail trading, and manufacturing sectors are the most hard-hit due to the Covid-19 crisis.  Even without Covid-19 crisis, the private sector in Malawi faces some challenges.

The development objective of the Financial Inclusion and Entrepreneurship Scaling Project for Malawi is to increase access to financial services, promote entrepreneurship and capabilities of micro, small, and medium enterprises (MSMEs) in Malawi including addressing Coronavirus disease 2019 (COVID-19) implications. The project comprises of four components:

The first component, liquidity enhancement for MSMEs aims at increasing the supply of wholesale financing to the project’s participating financial intermediary (PFIs) and scaling lending and or investments to MSMEs. It consists of following sub-components: (i) credit line and special support for COVID-19 response for MSMEs, and technical assistance to participating financial intermediaries; and (ii) de-risking financing to MSMEs.

The second component, scaling entrepreneurship and building firm capabilities will facilitate the building of firms’ capabilities, with measures to enhance the quality of business support provided by private and public business development service (BDS) providers. It consists of following sub-components: (i) building firm capability for SMEs; and (ii) developing capacity of SME Development Institute (SMEDI).

The third component, enhancing the enabling environment for supporting the financial inclusion and growth of entrepreneurs builds on activities supported under the Financial Sector Technical Assistance Project (FSTAP). It consists of following sub-components: (i) improving financial infrastructure and regulatory framework; and (ii) increasing financial literacy and consumer protection.

The fourth component, project implementation support will be used to meet the costs of the project implementation unit (PIU) in its capacity as the implementing entity, including costs related to fiduciary and safeguards aspects and monitoring and evaluation (M and E).