Factors Influencing Credit Demand among Household Non-Agriculture Enterprises in Malawi

Abstract

This study examined factors that influenced households with non-agriculture enterprises to bor-row funds as capital for their enterprises in Malawi. Additionally, the study aimed at classifying households as borrowers and non-borrowers, but also classified these households according to their liquidity status in which credit could be a component. The primary data for this study was sourced from the Integrated Household Panel Survey (IHPS) conducted in 2013 by the National Statistics Office of Malawi. Out of 4000 households that formed the sample, 1249 households were reported to own an enterprise; representing 31.23% of the overall sample. The logit model was used in this study and results showed that borrowing was influenced by age of household head, size of household, poverty status of household and enterprise sector. Furthermore, liquidity status was influenced by education attained by household head and poverty status of household. Poverty status of the households was found to influence both borrowing and liquidity non-constraint of households in Malawi. The paper shows the need to focus on poor households that are unable to support their enterprises with personal savings. In addition, policy makers must design programs that will provide credit to poor households operating manufacturing type of enterprises.