The Chamber of Deputies has resolved that Prime Minister, Edouard Ngirente, should address major issues that were identified in the governance and operations of the Business Development Fund (BDF), as well as its collaboration with its beneficiaries with aim to help it to deliver yield that was expected from it. This, the Lower House said, should be done within six months. It is one of the resolutions that the Lower House adopted on Thursday, November 12, 2020 during a plenary sitting in which it adopted an assessment report by the Public Accounts Committee (PAC) of the Auditor General’s report for the financial year 2018/2019. The Auditor General’s report revealed that, among other issues, BDF provided guarantees to large enterprises not aligned with its mandate – which is to support small and medium enterprises without sufficient collaterals in form of guarantees. It noted gaps in the management of the Credit Guarantee initiative that was initiated in 2011 to address SMEs challenges of insufficient collaterals to access loans from financial institutions. The National SMEs development policy defines SMEs as enterprises not exceeding Rwf75 million of net capital investments, Rwf50 million of annual turnover and 100 employees. However, the report found that BDF provided credit guarantees worth more than Rwf25.1 billion to finance 217 projects of large enterprises as opposed to the original policy of SMEs. That represents 51 per cent of total credit guarantees amounting to over Rwf49.2 billion provided from 2011 to August 2019. This, according to the report, implies that a high portion of loan collaterals was given to secure finance of 2 per cent of a total of 10,191 projects secured in this period of total. “This does not facilitate as many deserving beneficiaries to access finance as should have been. Providing credit guarantees to large enterprises deviates from the BDF mandate,” the report concluded. During a PAC hearing of Thursday, September 17, 2020 in which BDF top officials were providing explanations for mismanagement cases identified in the Auditor General’s report, BDF CEO, Innocent Bulindi told the members of parliament that the 51 per cent of portfolio that was taken by large businesses was possible because of the ceiling of Rwf500 million [annual net capital investment] that is allowed to a project in BDF policy. He said that unless the policy is reformed, the large businesses – requiring Rwf500 million [annual net capital investment] – will still be eligible. MPs rebuked BDF management, insisting that BDF should not be going out of the national SME policy scope to support such large businesses as they have means to deal with financial institutions and secure financing without the guarantee support that should be provided to small businesses. During the plenary sitting of Thursday, November 12, 2020, MP Albert Ruhakana wanted to know why BDF policy provided that it can provide guarantee to businesses with up to Rwf500 million investment capital, yet the national SME policy limits the eligible businesses to Rwf75 million investment capital. PAC Chairperson, Valens Muhakwa said that the mismatch between the guarantee eligibility criteria in the BDF policy and those in the national SME policy stems from misunderstanding the BDF mandate. “If the entity [BDF] was set up to support small and medium enterprises [through guarantees], yet it guarantees big businesses including foreigners, that is going out of mandate,” he said.
