Using integrated approaches to addressing access to finance challenges, building sustainable SMEs

By Grace Mugoya Since 2011, at least 2926 entrepreneurs in Small and Medium Enterprises have been able to access finance from various finance institutions with the Business Development Fund (BDF) providing guarantees worth Rwf40.6 billion. The loan amount of the beneficiaries stands at Rwf106. 3 billion. Initiated with a general objective of simplifying access to finance to have start-up businesses take course especially through the guarantee fund, BDF, has various products that also contribute towards realizing its mandate. They include grants, SACCO refinancing and Quasi Equity among others. Figures indicate that BDF has provided grants to 8155 projects with a grant support worth over Rwf4.41 billion. Through the SACCO refinancing, 33 SACCOS have benefited from BDF with financial support of Rwf1.35 billion. Through the Quasi Equity products, 19 projects have been supported at a financial tune of Rwf 1,286,270,282. Quasi Equity is a financing model that also aims at increasing funding opportunities for small and medium scale enterprises. It is seen as a direct response to commercial banks that had continued to ignore the financing of start-ups; as they are considered too risky. This financing model is where a category of debt in a needy firm is taken on by BDF but with flexible repayment options. It was specifically designed to address the challenge of SME’s that competed in the Hanga Umurimo programme but could not secure loans from banks due to lack of collateral.This scheme therefore targets firms in need of big loans. This year, at least 60 businesses that fall in that category will be supported. Hanga Umurimo is a government initiative that was launched in 2011 with the aim of stimulating innovation, empower communities with critical business skills and identify individuals with entrepreneurial aptitude to generate good and bankable business ideas. This programme is also expected to play a key role in the national achievement of the set goals for EDPRS 2 and contributing to the transformation of the country into a middle-income economy. Loans worth a total of Rwf835 million from commercial banks, of which Rwf670 million was guaranteed by BDF, was given to more than 50 start-ups in the pilot phase of Hanga Umurimo. BDF decentralizes operations In order to have its services easily accessed at the grassroots level,BDF has decentralized its services through establishing “Kora Wigire” Centres. These centers are expected to play key roles in promoting entrepreneurship and business development.

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Using integrated approaches to addressing access to finance challenges, building sustainable SMEs