Craft:

Maybe a cardboard insert in the shape you want?

You need to make a hem. Rip out the bind off row on the top so all your stitches are "live" again, and use a circular or dp needles to work in the round. Purl 1 round on the right side (this creates your fold line) Then knit for desired length of hem, I would do a few inches. BO all the stiches. Fold hem to inside of bag along ridge, stitch in place. Then I would line the clutch from the base of the hem down - so cute! Hope this helps...

Maybe Wire sewn inside material inside, in the way bra underwiring is put together?
Cool bag by the way! Your friends very lucky!

Cloth lining, something with some body, but not too stiff to work, and maybe a stiff plastic or cardboard insert to reinforce the bottom. The cardboard could be under the cloth or covered with it and outside the lining. Fusible webbing on the back of the lining material will stiffen it, too. Plastic canvas is readily available, easy to trim to size, and would work for the bottom.

In the future, remember rule # 1: stockinette curls. Use a few rows of something like seed stitch, moss stitch, garter, or ribbing the create a border around any edge that won't be seamed.

How cute!
If you used 100% NON-superwash wool, then put the clutch in a zippered pillowcase, fill the washer (top loading preferable) 1/4 full with the hottest water and about a tiny bit of detergent, and felt that bad girl.
Keep checking to make sure it's not becoming a wallet.
When it's felted to your desired size, rinse in cold water...don't spin it. It'll distort.
Roll it in a towel and press the excess water out.
Take some crumbled newspaper or paper bags and stuff the bag to the shape you want.
(If you want it to be a bigger size, then you might want to knit it again, only with bigger needles and with 2 strands of yarn...then felt it way down to the size you want.)
Sit it on a towel and let it dry!
All you should have to do is just line it if you want.

I think I'd use plastic canvas stitched to the inside to give it a rigid form.

I agree with Sarah: plastic canvas. Or, lightweight dowel rods at the top on the inside.

how about tacking in a cotton lining that has a 'frame' of light corset boning in it?

plastic canvas all the way, yo...

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