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Effects of Microcredit on the Financial Performance of Small Scale Cooking Oil Processors in Central Malawi

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Listed:
  • Lovemore Mtsitsi
  • Joseph Dzanja
  • Sera Gondwe
  • Bonet Kamwana

Abstract

The study was conducted to determine the effect of microcredit on financial performance of small scale cooking oil processors in central Malawi. Adopting a mixed research approach, the DuPont identity was used to compare the financial strengths and weaknesses between businesses that acquired a microcredit and those that did not. First, the study found that small scale cooking oil processing is a profitable business, regardless of their status in microcredit acquisition. However, microcredit had mixed effects on the financial performance of businesses. Microcredit improved the level of business capital for the businesses translating into better production efficiency, competitiveness and acquisition of a market share thus positively contributing to financial performance. On the other hand, microcredit increased the debt equity ratio hence increasing the businesses’ risk of default. The study recommends the businesses to further improve production efficiency and net asset turnovers. In addition, small and medium scale businesses ought to prudently contract microcredit in order to enhance their financial performance whilst checking for their risk of financial distress.

Suggested Citation

  • Lovemore Mtsitsi & Joseph Dzanja & Sera Gondwe & Bonet Kamwana, 2016. "Effects of Microcredit on the Financial Performance of Small Scale Cooking Oil Processors in Central Malawi," Journal of Agricultural Science, Canadian Center of Science and Education, vol. 8(6), pages 159-159, May.
    • Handle: RePEc:ibn:jasjnl:v:8:y:2016:i:6:p:159
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    References listed on IDEAS

    as
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    2. Alexander S. Kritikos & Denitsa Vigenina, 2005. "Key Factors of Joint‐Liability Loan Contracts: An Empirical Analysis," Kyklos, Wiley Blackwell, vol. 58(2), pages 213-238, May.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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