Modeling and Estimating the Climate Resilience for Renewable Efficient Energy Systems Among Small and Medium-Sized Enterprises in Malawi

Climate change is a global pressing concern that has affected all sectors, including the operations for Small and Medium Entreprises (SMEs) in developing countries, including Malawi. This has negatively affected the economies of scale, and exacerbated the SMEs’ growth. Nonetheless, renewable efficient energy (REE) systems, including solar and biogas, could help in building resilience to sustain their performance. In line with this, the study examined the factors that enhance the adoption of the renewable efficient energies, and constructed their resilience indices. Our study was grounded in the Diffusion of Innovation Theory and the Sustainable Livelihoods Framework. These theories guided the selection of variables to estimate a Multinomial Endogenous Switching Regression (MESR) econometric model, alongside estimating the absorptive, adaptive and transformative individual indices for 699 SMEs, using the 2019 Malawi Household Integrated Survey. The results from the MESR suggests that factors, such as access to credit, being male, access to education, access to capital sources, large profit share, bridging social capital and location among others, have a positive effect in influencing the adoption of renewable efficient systems. We simulated the adoption results, and found that SMEs who adopts REE increase their resilience by 87,3% and through the subsidy policy effect vulnerable SMEs who later adopts REE would shift their resilience by 0.169. Furthermore, the study found that transformative capacity plays the most important role in building long-term resilience for the SMEs. The study calls for polices, including establishing urban centers where SMEs can access information regarding REE and improving access to formal safety nets and capital sources beyond loan provisions.