Lack of inventories, high loan rates curtailing SMEs performance - BRD

Poor bookkeeping, high loan rates and lack of inventories are some of the major challenges small-and-medium enterprises (SMEs) face, which in turn affect their performance and growth, Alex Kanyankole, the Rwanda Development Bank (BRD) chief executive officer, has said. “Most SMEs have no registry books to show their assets and liabilities status. So, this makes it difficult for them to monitor or know their performance. That’s why we are working with Business Development Fund and Saccos to strengthen their managerial skills to support their performance,” he said. Kanyankole was speaking at the end of the Association of African Development Finance Institutions (AADFI) training workshop in Remera, Kigali on Friday. The training attracted 31 participants from Botswana, Rwanda, Kenya, Ghana, Zambia, Swaziland and Nigeria. Fifteen of the participants were also trained in strategic management, while 16 others got treasury, assets and liability management skills. Kanyankole said development finance institutions play a big role in supporting development projects on the continent, especially the SMEs and agriculture sectors which do not attract funding from commercial banks. He added that development finance institutions give loans at a low interest rate compared to commercial banks. “For instance, our interest rate ranges from 15 to 16 per cent compared to between 16 and 20 per cent charged by commercial banks,” he said. Mohammed A. Babangida, the head of treasury and corporate finance at Nigeria’s Bank of Agriculture, said the shortage of funding sources in Africa calls for appropriate management and efficient use of development finance institutions to deliver on their mandate. “If bank personnel acquire the necessary skills, Africa will be able to support key sectors, like agriculture, for its development,” he said. He noted that high interest rates are still a challenge that stifles business growth. Cyril A. Okoye, the training and research manager at AADFI, said they support risky areas like agriculture, which have been shunned by commercial banks, hence the need for the requisite management skills. “We organise such trainings to equip staff with skills to overcome challenges facing development finance institutions,” he said. He said financial institutions that support development projects mainly focus on sectors agri-business and SMEs, in which commercial banks have shown little interest because “they are more profit-driven”. He said AADFI also faces the problem of lack of access to accurate data “to serve as a basis for informed development planning”. AADFI’s main goal is to promote economic and social development in Africa through co-operation among banks and financial institutions. The association was created in 1975 and is headquartered in Abidjan, Côté d’Ivoire.

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Lack of inventories, high loan rates curtailing SMEs performance - BRD