A Study on Capital Budgeting with Reference to Micro, Small and Medium Enterprises (MSMEs) - Lilongwe City, Malawi

Rodney Chisembe*, Venkateswarlu P.**
*-** Department of Commerce, Andhra University, Visakhapatnam, Andhra Pradesh, India.
Periodicity:May - August'2024
DOI : https://doi.org/10.26634/jecom.4.2.21048

Abstract

Capital budgeting involves planning and controlling long-term and short-term investments in fixed assets. It requires investing cash now with the expectation of recovering it over more than a year. Evaluating these decisions means assessing the investment and its future cash flows, which come from added revenues, cost savings, or cost reductions. Most numbers used in these analyses are estimates. Capital investment decisions are crucial for organizations' strategic goals. This study explores the capital budgeting practices of MSMEs in Malawi by surveying ten manufacturing companies. Results show that 70.3% of these MSMEs use capital budgeting for short- and medium-term investments, often employing forecasting analyses, and some use cost-benefit analysis and executive decision-making. Most MSMEs struggle with capital budgeting due to limited knowledge, time constraints, and data issues. While 50.9% understand the "Decision Rule" in capital budgeting, 40% cite lack of knowledge as their biggest challenge, followed by time, manpower, and data availability. Capital budgeting in Malawian MSMEs is developing as they adapt to globalization's opportunities and challenges. It is therefore suggested that the Malawian government, non-governmental organizations, and business development providers should offer training in capital budgeting and proper business record-keeping to Malawian Micro, Small, and Medium Enterprises.

Keywords

Capital Budgeting, Micro Enterprises, Small Enterprises, MSMEs, Financial Management, Business Finance.

How to Cite this Article?

Chisembe, R., and Venkateswarlu, P. (2024). A Study on Capital Budgeting with Reference to Micro, Small and Medium Enterprises (MSMEs) - Lilongwe City, Malawi. i-manager's Journal on Economics & Commerce, 4(2), 60-84. https://doi.org/10.26634/jecom.4.2.21048

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