The Ministry of Trade and Industry (MINICOM) is seeking from the Treasury Rwf500 million during the next financial year to initiate a guarantee facility for exporters in the ongoing efforts to reduce the trade imbalance.

Officials at the ministry told Members of Parliament that the money will be placed in a bank to subsidise loans that are given to exporters and make it possible for them to get loans that they would otherwise be denied by banks that don’t find exportation projects from traders attractive.

While meeting members of the parliamentary Standing Committee on Budget, last week, the Permanent Secretary at MINICOM, Emmanuel Hategeka, admitted that the Rwf500 million asked to start exporters’ guarantee fund is relatively a small amount of money, but explained that it is needed for a good start before the fund could be grown further over time.

"It will be a small amount of money but it’s a good start. We wish we had more money to throw on this fund,” Hategeka told the MPs as he courted their approval in funding the initiative.

While Rwanda’s exports have been increasing at about 20 per cent over the last five years, the government has targeted to increase exports by 28 per cent per year under the second Economic Development and Poverty Reduction Strategy, which officials say will greatly reduce the country’s trade deficit by 2017.

According to the Minister for Trade and Industry, François Kanimba, setting up an export guarantee facility will help exporters to venture more into trading at foreign markets where they have been shying away from exporting their goods because they would lack the capital needed for initial investments.

"Exporters may need a lot of money at the initial stage when they have contracts to export goods. While some banks would not consider such contracts as collateral and lend traders the money they need to execute their contracts, we believe that the guarantee facility will be used as collateral for the exporters to get the loans they need to implement their projects,” Kanimba said.

While the Rwf500 million requested from the National Budget for the Financial Year 2015/16 will be seed funding to kick-start the export guarantee facility, Minister Kanimba said the Ministry of Finance and Economic Planning will work on how to get more sources of funds for the facility.

He also revealed that the Development Bank of Rwanda (BRD) has agreed to throw more money on the fund should the government put the initial Rwf500 million in the bank.

Exporters welcome initiative

Meanwhile, many exporters have welcomed the initiative to set up the facility, saying that it will enable banks to start looking at exporters’ business projects in a better way.

"The fund will be very helpful because it will change the way banks have been looking at our projects. A project to invest in paying farmers to grow fruits and vegetables for export shouldn’t be considered as just any other agriculture project whereby loans for farming projects are hard to get,” said Vianney Kabera, the director of Fresh Pack Exports that exports fresh produce such as pepper, green beans, sweet banana, avocadoes, and many other types of fruits to Europe.

Jean Malic Kalima, the managing director of Wolfram Mining and Processing Ltd, who is also the chairperson of the Rwanda Mining Association, said he can only hope that the export guarantee facility will get more funds because the Rwf500 million that is being requested to start it remains a drop in the ocean.

"Rwf500 million is a small amount of money given that we currently need seven million dollars (about five billion Rwandan francs) to boost the mining sector. The fund is a good initiative but it should grow to become bigger over time,” said Kalima.

Even if there will be final touches on budget figures for the next fiscal year 2015-2016 when officials at the Ministry of Finance and Economic Planning (MINICOFIN) will consider observations from MPs on the current budget estimates proposal, minister Kanimba has said that officials at Minecofin have agreed to allocate the Rwf500 million for the export guarantee facility in the next fiscal year.

Last year, the country’s total export receipts increased by 4.7 per cent in value to $599.8 million (Rwf428.9 billion) from $573 million (Rwf409.7 billion) in 2013, while volumes increased by 5.1 per cent.

Despite this, however, the import expenditure widened the trade deficit by 7.5 per cent to around $1.8 billion, up from about $1.7 billion, a gap policymakers say must be reduced if the country is to reach its development aspirations.

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