Effect Of Banking Services Operations On The Performance Of Micro, Small And Medium Enterprises (MSMEs) In Lilongwe City, Malawi

Abstract

Small and Medium Enterprises (SMEs) have been widely recognized as engines for economic growth across countries. In Malawi, Micro, Small and Medium Enterprises (MSMEs) sector was reported to have contributed 25% to Malawian household incomes and employed 38% of the labor force. However, performance of the MSME sector has been noted as dismal. SMEs are faced with many challenges that include access to financing leading to stagnation and failure. The objective of the study was to assess the effect of banking service operations on the performance of SMEs in Lilongwe City, Malawi. The study targeted population were registered MSMEs in the City of Lilongwe. The study used a cross section survey technique where a questionnaire was used to collect quantitative primary data from 168 respondents. A descriptive research design was adopted using the Cronbach formula to sample 168 MSMEs. A random sampling technique was used to select the 168 MSMEs who participated in the survey. Data was analyzed using SPSS statistical package version 20 and Stata version 14. Descriptive statistics (frequencies and Pearson’s Chi square) and inferential statistics (rank of Chi square) and Logit Multivariate Model were used in the analysis. The study findings indicated that level of education had a significant association with SME performance and use of banking services. The study found no significant difference between the ages of the businesses and performance of SMEs. The study however, found a significant association between bank payment services and SME performance. Furthermore, the study found a considerable association between banks training services and SME performance. The study concluded that the level of education and experience were significant in the use of banking services and products. Bank payment services, as well as bank training services, were positively related to SME performance and significance. The study recommends a deliberate government policy that includes financial education in the county’s curriculum as well as a national service for school leavers to equip them with entrepreneurial skills and experience. Banks should improve their savings and investment services to help SMEs build capital and improve production. The study also recommends more investments in payment services by banks to improve payment options such as foreign exchange to improve and widen payment options and ease the pressure on the use of foreign cash.