The National Statistical Office has released findings of the Micro, Small and Medium Enterprises (MSMEs) Survey which shows that financial exclusion of the sector is costing banks billions of kwacha.

The report which was launched in Lilongwe by the Minister of Industry and Trade, John Bande, says the country has about 760,000 MSMEs that generate an annual revenue of US$2 billion (about K500 billion) yet about 66 percent of the sector does not access to banking services.

The survey, nationally representative, focused on small businesses and their financial needs, providing evidence-based information to enable government develop policies supportive of the sector.

The report says only 22 percent have or use products or services offered by commercial banks, while 13 percent use formal but non-bank financial institutions.

Bande said no country can hope to achieve sustainable economic growth without expanding and diversifying trade with small business.

"A vibrant small and medium enterprises sector can become a catalyst for accelerated economic development for Malawi," said Bande.

The survey establishes that the smaller the business, in terms of number of employees, the less likely that the owner has or uses banking services to manage the finances of their businesses.

"Three quarters of small business owners do not borrow because they are wary of their ability to repay the loans. The largest source of credit for small business is friends and family, followed by village bank of cooperatives," reads a statement about the survey.

The report says about 71 percent of business owners mainly borrow to pay back debts and 54 percent borrow to grow their businesses.

Bande said results of the survey will be vital in the development of a new SMEs policy as it has a number of areas that need to be considered.

"The MSMEs survey results will provide a basis for policy makers to give full consideration to MSMEs at the early policy development stage," he said.

Bande further said, ideally, initiatives impacting on business should be developed from the point of view of MSMEs.

The survey, funded by the UK Aid, EU, UNDP and the World Bank, was presented to the stakeholders from different sectors.