Credit Demand and Supply Study of Malawi's Tea Sector: Deepening Malawi's Microfinance Sector Project

This study aims to gather and make available credit demand and supply data to increase the flow of sustainable financial services to the tea sector.The study:

• Examines the tea value chain to gain a better understanding of how the commercial growers/processors (estates) and smallholder tea growers finance their economic activities.
• Surveys key stakeholders in the sector including the estates, smallholder tea growers, input suppliers, banks, leasing companies and microfinance institutions to:
  • Quantify the level of credit currently being accessed,
  • Quantify financing needs that are not being met, and
  • Make recommendations for addressing the financing gaps.

The study presents the following findings about:

• Commercial producers/processors:
  • They use a high level of self-financing in their business,
  • Estates are able to access working capital credit from the local banking sector,
  • Their primary financing gap is longer term United States (US) dollar financing for capital and development expenditure projects,
  • Estates and banks can be linked with development finance.
• Smallholder tea growers:
  • Estates are the only value-chain actors currently extending credit to smallholder tea growers,
  • There is an unmet credit demand for the majority of existing smallholder tea growers,
  • Estates receive high repayment rates,
  • There is a role for banks to extend/replace the credit that estates provide,
  • Nurseries and new-growers are longer-term interventions that will require support form development partners as well as the private sector.