EIB chief calls for tailored products for SME sector

Nikolaos Milianitis is the deputy head of regional representation and senior loans officer European Investment Bank (EIB), which supports development projects in Central and Eastern Africa by extending affordable credit to commercial banks for onward lending to their clients, particularly the small businesses. EIB has already given out loans and equity investment of about €1.6 billion in the past 10 years in 17 countries in the region. Milianitis talked to Business Times Peterson Tumwebaze about the banks long-term strategy for Rwanda and the SME sector in particular. What is the European Investment Bank doing to help the small entrepreneurs to expand their operations in SMEs in region? We have been supporting the SME industry for more than nine years and we currently have a €600 million fund targeting this particular sector. The idea as the bank is to provide both technical and financial assistance to the sector because of the sector’s role towards economic development. We are also funding the infrastructure projects which SMEs can use to bolster. Tell us more about your approach of funding and technical assistance? Whenever we give a loan, we also give technical assistance to the beneficiary banks and their clients so that the credit is profitable. The logic behind this approach is because clients must have the financial knowledge and skills to use the loan profitably. We also think it’s important because the level of expertise and how prepared the business men are means they can get appropriate funding that will help facilitate economic growth. On this particular issue, we have a €5 million technical assistance covering four countries, including Rwanda, and 23 institutions. The idea is to extend it to ensure it covers more SMEs, this way we will spur meaningful economic growth. What should be done to improve access to credit by SMEs since banks have shunned the sector? In relative terms we are encouraging development partners to give affordable lines of credit to banks because, ultimately, they are the ones to decide depending on the cost and availability of the credit. Secondly, once there is money, we can then encourage banks to give long-term loans instead of short-term funding which often has no impact on the economy. Giving SMEs credit of up to seven years allows players some ample grace period to stabilise and implement their projects before they can start repayments. This way you are growing the industry. What is the bank’s long-term strategy in East Africa and Rwanda in particular? We want to increase what we are doing here and, I think by the end of the year we will have doubled what we have done in the last nine years. The strategy is to give more credit to commercial banks so they can support microfinance and SME sectors. How can the microfinance sector contribute to the growth of SME sector? There is need to recognise the role played by the microfinance institutions because they are active at grassroots level, where there is a big SME base. They should therefore carry out a lot of financial training and awareness campaigns on the products they offer the sector for it to benefit. How can SMEs tap into this opportunity? They should embrace new and innovative initiatives, invest in capacity building and try to re-invent to expand their enterprises. When it comes to access to funds, the SME industry will have to identify banks with products that are targeted at the sector. For us as an investment bank, we give banks all the necessary tools which they can use to help the SMEs, and these include giving them affordable credit for onward lending to the SME industry.

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EIB chief calls for tailored products for SME sector