THE ROLE OF MICROFINANCE IN SUPPORTING SMALL SCALE BUSINESSES: A CASE STUDY OF NSUNGWI MARKET, MALAWI

This study investigated the role of microfinance services in supporting the growth and sustainability of small businesses at nsungwi market, malawi. In a country where over 60% of population lives below the national poverty line and the informal sector dominates employment (world bank,2023; NSO Malawi, 2022) small businesses are crucial for economic survival and local development. These businesses often faced financial constraints due to limited access to formal banking services caused by lack of collateral, formal registration, or credit history. Microfinance institutions (MFIs) provided tailored services such as microloans, savings accounts, insurance products, and business training programs to promote financial inclusion among underserved populations (Ledgerwood, 1999; Armendáriz & Morduch, 2010).

The study evaluated the impact of microfinance on business indicators such as income levels, capital reinvestment, business expansion, and resilience to economic shocks. Findings showed that microfinance had a generally positive effect on enterprise performance; however, challenges such as high interest rates, limited financial literacy, and insufficient post-loan support reduced its effectiveness (Bauchet et al., 2013; Giné & Karlan, 2014).The study provides evidence-based recommendations for policymakers, practitioners, and development agencies to improve the design and delivery of microfinance programs, particularly in informal markets like Nsungwi, where financial inclusion is key to economic empowerment.

Despite the growing recognition of microfinance as a tool for poverty reduction and entrepreneurship support, existing literature presents mixed findings regarding its actual impact on small businesses, especially in informal markets (Ledgerwood, 1999; Kabeer, 2005).

Most studies focus on urban areas or national-level data, often overlooking localized settings such as Nsungwi Market.