Reading the recent World Bank Malawi Economic Monitor, Reversing Malawi’s Export Decline, one statistic particularly stood out: Malawi has only 3.2 exporting firms per 100,000 people, compared with an African regional average of 28.
That number tells a story far bigger than exports.
It tells us that our population is growing much faster than the number of businesses capable of creating jobs, generating foreign exchange, paying taxes and driving economic growth. We have millions of people, but too few economic entities producing at scale and participating meaningfully in regional and global markets.
The uncomfortable question, therefore, is not simply: Why are Malawi’s exports declining?
Perhaps the more fundamental question is:
Why are we not creating enough companies capable of exporting?
The banking system is changing and that creates an opportunity
For many years, Malawi’s commercial banking sector has benefited from a business model heavily influenced by government borrowing. High interest rates and substantial government domestic borrowing provided banks with relatively attractive and lower-risk opportunities to deploy their balance sheets.
As a result, commercial bank balance sheets have grown significantly.
But the environment is changing.
With Government slowing its reliance on domestic borrowing, the banking system is increasingly facing a different problem: liquidity without sufficient productive lending opportunities.
Recent data illustrates the paradox. The banking system reportedly had record excess liquidity, with average daily reserves reaching K511.7 billion in Q1 2026, a 741% increase from Q4 2025. Yet private-sector credit contracted approximately K144.6 billion (The Reserve Bank of Malawi, Second 2026 Monetary Policy Report).
We have money in the system, but not enough bankable businesses to absorb it.
Yet this is also where one of Malawi’s greatest misfortunes can become one of its greatest fortunes.
Banks are competing for the few good businesses
Walk into any commercial bank today and you will find a familiar phenomenon.
Established exporters and strong corporates are the beautiful women in town. Everyone wants to take them out.
Banks compete aggressively for the same limited pool of established, cash-generating businesses. The result is that pricing for these companies is increasingly becoming more competitive, which is positive.
But there is a problem.
Lowering the price of capital does not solve the shortage of businesses.
It does not create new exporters.
It does not bring new manufacturers into existence.
It does not revive companies that have disappeared.
And it does not address the structural reality that Malawi needs many more economic entities if it is to create jobs, generate foreign exchange and broaden its productive base.
Some companies that once played significant roles in Malawi’s economy during the one-party era no longer exist. Others have survived but have significantly reduced their scale.
We cannot build the economy of tomorrow simply by competing over the balance sheets of yesterday’s successful companies.
We need to birth new companies.
We need to change how we deploy capital
This requires a fundamental shift in how we think about development finance.
Traditionally, much of our financing conversation has centred around a simple question:
“How much can we lend, and what security can the borrower provide?”
But a new enterprise does not necessarily have a balance sheet.
A new project does not necessarily have historical cash flows.
An entrepreneur with a compelling idea may not own sufficient property to pledge as collateral.
And a project that could generate millions of dollars in exports may require substantial investment before it becomes bankable.
This is precisely where conventional lending can fall short.
We need to finance the journey to bankability—not only the business that is already bankable.
a) Project preparation funding: financing the journey
One of the most powerful tools available to us is project preparation funding.
A project may start as nothing more than an idea: a mineral resource that needs further exploration, an agricultural opportunity requiring technical studies, a manufacturing project requiring feasibility analysis.
The traditional financial system may say:
“Come back when the project is bankable.”
But someone has to make it bankable.
Project preparation funding can finance the studies, technical assessments, feasibility studies, environmental and social assessments, financial modelling, legal work and other activities required to transform an idea into an investable project.
Instead of waiting for bankable projects to arrive, we can help create them.
b) Equity: backing businesses before they have a balance sheet
The second shift is recognising that development finance cannot be synonymous with debt.
If Malawi wants to create new economic entities, we must be prepared to invest equity in strategic ventures.
Equity allows development financiers to participate in the upside of new businesses while giving the companies time to establish operations, build their balance sheets and demonstrate commercial viability.
This is particularly important for strategic export and import-substitution ventures where the economic benefits extend beyond the individual company.
The objective should not simply be to finance companies that already exist.
The objective should also be to help create companies that Malawi will need tomorrow.
c) Guarantees: unlocking capital where collateral is scarce
Guarantees are another important part of this equation.
A promising new business may have a viable market, capable promoters and strong cash-flow prospects but inadequate collateral.
If we insist that every financing transaction must be secured by existing physical assets, many potentially transformative businesses will never get started.
Guarantees can help bridge that gap.
They can give commercial banks the confidence to finance sectors and enterprises that they may otherwise consider too risky, while allowing the promoter to build a track record and balance sheet over time.
In other words, we should not only ask what assets the entrepreneur owns today. We should also ask what economic value the business can create tomorrow.
Project finance: financing the cash flows of tomorrow
Malawi also needs to embrace project finance more deliberately.
For large-scale infrastructure, agriculture, mining, manufacturing and export projects, financing should increasingly be structured around the project’s future cash flows rather than solely around the balance sheet of the promoter.
This creates room for projects that are economically viable but whose sponsors may not have the traditional collateral required under conventional lending models.
It also forces us to ask better questions:
- Is there a market for the product?
- Is the technology proven?
- Are the inputs available?
- Is there a credible off-taker?
- Can the project generate foreign exchange?
- Are the projected cash flows sufficient to service the financing?
These are the questions that determine whether a project is viable, not simply how much property the promoter owns.
Turning Misfortunes into Fortunes
Malawi’s challenges are real.
We have a shortage of foreign exchange.
We have too few exporters.
We have limited private-sector credit growth.
We have businesses that have disappeared and industries that have struggled to scale.
But within each of these challenges lies an opportunity.
The shortage of exporters is an opportunity to create exporters.
The excess liquidity in banks is an opportunity to redirect capital towards productive investment.
The shortage of bankable projects is an opportunity to finance project preparation.
The shortage of collateral among emerging businesses is an opportunity to expand the use of guarantees and equity.
The shortage of foreign exchange is an opportunity to deliberately build businesses that generate it.
If Malawi is to reverse its export decline, we cannot simply wait for exporters to emerge.
We must help create them.
And perhaps the greatest opportunity of our time is to take the very challenges that have held Malawi back and deliberately turn them into the foundations of the next generation of Malawian businesses.
Our misfortunes can become our fortunes but only if we have the courage to deploy capital differently.
This is the kind of thinking that makes the work of development finance institutions like the Export Development Fund (EDF) particularly important.
EDF has increasingly positioned itself to play a catalytic role in this space. Not simply by providing traditional debt financing, but by deploying a broader range of development finance instruments, including project preparation facilities, equity investment in strategic export and import-substitution ventures, guarantees and other tailored financing solutions.
