It will now be possible for more small-and-medium enterprises (SMEs) to access development finance, thanks to deals signed between the African Guarantee and Economic Co-operation Fund (FAGACE), the Development Bank of Rwanda (BRD) and the Private Sector Federation to facilitate funding of short and medium-term investment projects. 

The deals, signed on Wednesday, will see BRD and FAGACE offer financial security and project co-funding to SMEs.

"The co-financing arrangement offers owners of medium and long-term investment projects attractive financial conditions such as low interest rates and financial security to enhance their credit worthiness,” said Alex Kanyankole, the BRD chief executive officer.

BRD has been working with the government-supported Business Development Fund to provide financial security for private sector projects, especially start-ups by youth and women. In 2007, BRD secured a Rwf1.1b loan guarantee facility from FAGACE.

Henri-Marie Dondra, the FAGACE managing director, said supporting development financial institutions was crucial to ensure entrepreneurs access funding to implement their projects.

"Most businesses cannot access financing because they lack collateral. Therefore, FAGACE works with institutions, such as BRD, to provide funds and loan guarantees to the private sector to support ventures aimed at fighting poverty through job-creation,” said Dondra at the signing ceremony.

According to the agreements, entrepreneurs will also be able to borrow directly from the Fund.

Dondra said individual SMEs would be able to acquire between $100,000 (about Rwf65m) and up to Rwf10b for long-term projects, at between 1 to 3 per cent interest rate.

The Fund will offer three types of guarantees with different fee structures; portfolio and individual loan guarantees, bank fund raising guarantees, and equity guarantees. 

"We believe that for the private sector to thrive, entrepreneurs must access affordable funds to expand their businesses,” Dondra said.  

Benjamin Gasamagera, the Private Sector Federation chairperson, said the support will boost the private’s capacity, helping it to deliver on the second Economic Development and Poverty Reduction (EDPRS2) targets, improve household incomes and reduce poverty among the masses.

FAGACE’s mission is to contribute to economic and social development of its 14 member states, including Rwanda.