The Business Development Fund (BDF) will facilitate the creation of at least 23,700 off-farm jobs this year through supporting investment ventures of Rwandans in various sectors, Innocent Bulindi, the Fund’s chief executive, has said.

The job pledge is the Fund’s contribution to the government’s restructured efforts to curb unemployment under the National Employment Programme (Nep) seen by officials as a vehicle through which they will coordinate efforts in the creation of 200,000 off-farm jobs a year.

"I believe investment facilitation is the surest way through which we can create those jobs and this [23,700] we believe is a realistic target that we can achieve as BDF,” Bulindi said.

Using Rwf5.6 billion as capitalisation grant from the government, Bulindi told The New Times yesterday that BDF will provide credit guarantees for over 1,000 projects this year to enable budding entrepreneurs find capital from the usually intricate banks.

With credit guarantees of up to 75 per cent, Bulindi thinks BDF can significantly ease the stringent requirements demanded by financial institutions especially collateral as conditions for loan approvals.

The Fund says it will also sign off over 80 loans worth Rwf1.3 billion towards refinancing Saccos to enable them maintain the liquidity required to support the grass root demand for credit.

The money will also be used to provide loans to about 7,000 small and medium scale enterprises (SMEs) as well as grants to at least 3,900 entrepreneurs with strong ideas that have the potential to create jobs.

It’s through these combined interventions that BDF hopes to help create the 23,700 jobs by the end the year, a target whose results Bulindi said will be assessed after every six months.

Although government has committed to create 200,000 off-farm jobs every year, there has been no policy instrument to guide the implementation or measure its performance.

For instance, although various job creation initiatives such as ‘Hanga Umurimo’ are ongoing, there’s no fresh statistics to show how many jobs were created in 2014.

However, Nep coordinator François Ngoboka says the programme has an inbuilt labour information management system to track down the jobs created in a year, which will help inform technocrats about the performance of their efforts.

"After every year, we shall be integrating information from the various job creation initiatives to determine performance,” said Ngoboka.

In order to optimise the impact of employment interventions in the country, government created Nep that will be working closely with all stakeholders, including BDF, to create sufficient jobs that are adequately remunerative and sustainable across the economy.

BDF’s role

The Business Development Fund is seen as a critical stakeholder in attaining NEP’s targets because government seeks to create the majority of jobs through facilitating SME development and BDF’s main focus is in helping entrepreneurs to find initial operational capital.

In order to have a national presence, BDF recently decentralised its structures and created centres in each of Rwanda’s 30 districts after it took over what were previously known as Business Development Centres (BDCs), renovated and renamed them as ‘Kora Wigire’.

"Now clients can access all our products and services anywhere in the country at those Centres which are fully equipped with staff to efficiently deliver services,” said Janet Kanyambo, the Fund manager.

Providing credit guarantees for good bankable projects that don’t have collateral items to present to banks is BDF’s flag service and between 2011 when it was established and January 2015, the Fund had guaranteed 2926 projects worth Rwf106 billion of which over Rwf40 billion was approved.

Guarantees work in a way that a bank can extend credit to someone with a good project but who lacks collateral, and BDF pledges to cover 75 per cent of the total loan, in the event of defaulting.

BDF also manages a multi-million dollar Rural Investment Facility (RIF) grant availed by the Ministry of Agriculture and Animal Resources (Minagri) whose main purpose is to provide incentives for financial institutions and entrepreneurs to make productive investments in agriculture.

Bulindi said 8,155 projects have so far benefited from the Fund’s grant product amounting to over Rwf20.7 billion although only Rwf4.4 billion has been approved.

The Fund has also injected over Rwf1.3 billion into refinancing at least 33 Saccos, while another over Rwf1.2billion has been invested in 19 projects under BDF’s new product, Quasi-equity.

Under Quasi equity, BDF buys a stake into SME projects that have potential to break even and create jobs.

The scheme was initially designed to benefit small and medium enterprises that competed in the Hanga Umurimo programme but failed to get loans from banks due to lack of collateral security or failure to attract the attention of banks.

Curbing bad loans

Bulindi says BDF’s interventions are conditional and that there are penalties for those who divert the money meant for a specific purpose into other ventures.

Normally, for the Fund to guarantee a project the financing bank must have been satisfied with the quality of the project’s business plan upon which they write to BDF for support; BDF also undertakes its own risk appraisal before approving funds.

In spite of the seemingly strict due-diligence, BDF’s portfolio of Non-Performing Loans is souring and currently stands at 9 per cent, according to Bulindi. Currently, at least 229 assets/projects worth Rwf3.7 billion are struggling to pay back.

"Most of these bad loans can be attributed to poor business models, lack of business management experience, poor market and general capacity issues among beneficiaries,” Bulindi said.

But under BDF’s restructured operations, the Fund has hired and trained Business Development Advisors (BDAs) who are deployed at lower local government centres to help applicants improve the quality of their business plans in order to improve project success.

"A client approaches a BDA, who appraises the client’s project and if seen to be viable, the BDA advises the client to proceed to the bank where the business plan and loan request is appraised and if a client requires supplementary help [such as collateral support] applies to BDF,” Bulindi added.

But in some cases, the BDA prepares the business plan with the client before forwarding it to the BDF district centre for assessment for a guarantee, grant or quasi equity; if the plan passes the BDA and client head to the bank to process for credit.

"We believe this close working relationship not only takes BDF closer to the people but also helps improve the quality of the business plans hence higher chances of passing the evaluation by financial institution,” said Bulindi.

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