Unemployed youth with the eye for enterprise have a reason to smile after the Ministry of Trade and Industry and Umurenge Saccos signed a Rwf223  million deal to provide them with short-term loans to start or expand their businesses.

Martin Hagenimana, the head of youth development at the at the ministry’s Single Project Implementation Unit, said the funding that will benefit young entrepreneurs who were recently trained in business skills by the trade and industry ministry, would be channelled through 38 Umurenge Saccos countrywide.

The loans will attract an interest of up to 24 per cent, depending on the Sacco and level of client.

The funding is part of a development grant from United Nations Development Programme (UNDP) secured by government earlier this year.

Under the UNDP-government deal, the Ministry of Trade and Industry was expected to scale up small-and-medium enterprise development initiatives, including apprenticeship training for youth and school dropouts selected from Nyabihu, Kamonyi, Ruhango, Nyamagabe, Rwamagana, Gasabo, Kicukiro and Nyarugenge districts.

Hagenimana said the three-month training ended in June and benefitted 1,500 youth.

The Saccos

They trained in carpentry, tailoring, basic automobile mechanics, hair dressing and welding.

"We are continuing our facilitation to the trainees through this facility to enable them buy start-up kits,” he said, adding that the Saccos through which the loans will be disbursed were selected based on their National Bank of Rwanda (BNR) credit rating, and proximity to the trainees.

A Sacco’s credit rating ranges from one to three, according to the BNR Sacco rating report of December 2013.

Hagenimana said the beneficiaries would get loans of up to Rwf2m and repay within 24 months. There is a grace period of two months, in case a client requests for it.

Deo Munyemana, the head of Nduba Sacco, expressed worry that some of the intended beneficiaries might not be able to repay the loans.

"We borrowed money from commercial banks last year to finance projects under the Hanga Umurimo project and clients failed to pay. This created a huge problem for us,” he said.

Jali Sacco’s Francois Rutitisha said Saccos should be given guarantees to ensure they recover the money in case of default.

Hagenimana explained that the tool kits bought by the beneficiaries would act as collateral.

He, however, advised the Saccos to employ strong loan appraisal mechanisms and ensure constant monitoring during the loan servicing period.

"Saccos shouldn’t take this facility for granted. You must recover all money you lend out as per the Sacco credit policy,” he said, noting that they would only pay back 50 per cent of the total amount received from government.

Hagenimana assured the Umurenge Sacco operators that the young entrepreneurs received enough training to run projects profitably.

He said the Sacco loan facility would promote self-employment and job-creation, especially among school dropouts and unemployed graduates.