At a time when a large section of local Small and Medium Enterprises (SMEs) and start-ups have been found to be facing issues that make them ineligible to credit from financial institutions, Bank of Kigali  is seeking to help reverse  the trend.

The bank is one of the four subsidiaries of BK Group, which last week announced a profit after tax of Rwf 7.5 billion in the first quarter of 2019, as well as surpassed the $1 billion valuation in assets becoming the first Rwandan company to reach the mark.

At the moment, its large  corporations operating in the local market that are eligible to access to credit with  the local financial institutions ‘fighting’ for the attention of the firms.

To change status quo, bank’s officials said that they are seeking to expand the percentage of firms that are eligible to credit by working with the emerging Small and Medium Enterprises.

Multiple studies on the local SME sector have shown that emerging firms continue to face challenges such as lack of adequate governance, poor bookkeeping practices, little market research and poor business plans among others.

Its challenges that have driven up SMEs risk perception and often blamed for non-performing loans. For instance Bank of Kigali’s non-performing loans grew by 16.5 in the first quarter compared to the same period last year to Rwf 39.2 billion.

Among the approaches by Bank of Kigali include working alongside the SMEs to point out common challenges and ways to address the challenges such as bookkeeping practices among others.

The bank’s Chief Executive Officer Diane Karusisi said that they also have incentives for well managed SMEs by giving them subsidised loans in a bid to encourage improved management practices.

"The main problem has been governance, these are typically managed by one person and when there is a small problem with that person, the whole company starts struggling. We are making sure that adopt ideal business practices such as record their financials, this is something that will work on for the next couple of years. Most SMEs do not understand the importance of having an accountant to look into their books,” she said.

She added that they were making gradual process with the intervention.

"We are making progress. With the new credit approach that give subsidies to well managed SMEs, we are telling our customer that if you show us that you are managing your business better, you will get better rates,” she added.

The bank’s Head of Business, Barnabas Kalenzi, said that other persistent challenges observed in the local market which they are seeking to address include challenges around security and collateral when SMEs seek credit.

With most of the start-ups and SMEs having little if any assets to deposit as collateral when seeking loans, the risk perception often leads to loan rejection.

To address the challenge, Kalenzi said that they are working with guarantee funds such as the Business Development Fund, among others, as well as partnered with business trainers to build capacity in the problematic areas.

"There are also challenges around security, collateralisation of loans. Many loans are rejected because of security, we are partnering with several guarantee funds to be able to increase the collateralisation of these facilities. We have also partnered with firms like Inkomoko and BPN  to be able to do some training on management of these companies,” he said.

Commenting on the performance of the interventions so far, he said that there was some notable improvement saying that they are likely to scale up the intervention to a bigger level.

"We are already seeing some progress in firms that have undergone this training and hopefully we can scale it to a bigger level,” Kalenzi said.

Such interventions, he said are aligned to supporting government priorities such as  support to local producers under the Made In Rwanda initiative, boosting job creation and support emergence of competitive local enterprises among others.

Bank of Kigali is currently the market leader in regards to lending with 32.9 per cent market share.

editor@newtimesrwanda.com