In a bid to support access to finance by small and medium enterprises, the Business Development Fund had by end of November disbursed credit guarantee funds worth Frw 19.6 billion related to 1,409 loans.
The agriculture sector, which employs majority of the country's population, takes the largest percentage of the total disbursements from the fund established by government to provide guarantees to businesses that want to apply for loans from banks but lack collateral.
Agriculture took Frw 13.9 billion accounting for 71% of the total guarantees, which benefited farmers in coffee, tea and maize, among others. The remaining Frw 5.8 billion went to non-agriculture sectors that include real estate, artisans, manufacturing, hospitality, services and education.
"We have continued to grow our portfolio this year stimulating loan disbursements of over Frw 56 Billion that small businesses need to fuel their growth and create jobs," said Innocent Bulindi, the fund's CEO.
Financial institutions have been reluctant to finance the growing SMEs sector due to its nature of operation where it cannot provide the necessary requirements from financial institutions to provide credit.
"It is true that banks are businesses and so they tend not to take the risk, while on the other hand we see the SMEs struggle to get adequate credit to grow their businesses," remarked Davis Mukiza, a business consultant.
But Bulindi observed that opportunities do exist for SMEs "It's just that the banks have not approached us to start using the facility."
Small businesses comprise over 90% of the fund's portfolio by number of loans and 76% by amount. BDF saw an increase in total loans disbursed by banks rise from Frw 747.3 billion in December 2012 to Frw 788.2 by June 2013 whilst microfinance total loans increased by 7.9%.
In addition, the fund played a significant role in providing credit guarantees to 194 beneficiaries under the Hanga Umurimo program, the ministry of industry and trade's initiative to boost creation of jobs that totaled to over Frw 2.08 billion with stimulated lending by the banks at Frw 2.8 billion.
Again, with the fund providing loans worth Frw 1.1 billion to ten Savings And Credit Cooperatives (Saccos), there is optimism that access to credit by rural small businesses with a turnover of less than Frw 5 million, will be realized.
"Saccos have flexibility to provide small loans to small businesses, so extending such guarantee funds to them is one step to growth and job creation by SMEs," Mukiza noted.
Under this program, the fund centers attention to the 6 poorest districts with emphasis to on-lending of women and youth businesses. For example, the ratio of women and youth supported stands at 43% and 32% respectively.
Moreover, the New Partnership for Africa's Development (NEPAD) through Minicom has provided a two-year grant program worth Frw 133 million with the aim of improving opportunities for women in cross-border trade to access micro-loans,
"This is a highly subsidized facility that will provide Saccos loans at 1% interest cost for a 3-5 year period with an interest cap of 10% targeting women beneficiaries," Bulindi said.
