Over 30,000 jobs are expected to be created thanks to a new 5-year project intended to help grow small and medium businesses in the agricultural sector, and create non-farm jobs for rural Rwandans through easing access to funding for agribusiness SMEs’.
The project specifically aims to invest in SMEs that support the agricultural sector and add value to agricultural commodities, such as firms that provide storage, processing, transportation, or leasing of farming equipment.
To achieve the goal, managers of the $14.9 million (about Rwf12.9 billion) project, known as Nguriza Nshore ("Lend So That I May Invest”) – which will run from 2018 to 2023 – said it will develop an enabling environment to ease funding to agribusiness entrepreneurs use new methods and approaches that will reduce the risk of lending to growing businesses, such as through agriculture insurance, covering collateral among others.
To this end, the initiative will work with financial institutions and private investors to facilitate loans and investments that total Rwf39.5 billion in private funds to small and medium businesses, according to the project executives.
The money consists of over Rwf13 billion in loans from financial institutions, and over Rwf26 billion in private investments for off-farm small and medium businesses.
Funded through the US Government’s Feed the Future initiative, Nguriza Nshore will also work with a variety of Government of Rwanda ministries to support the development and implementation of policies, regulations, and strategies that foster growth in both number and size of Rwandan small and medium businesses.
Addressing lack of agribusiness SME funding
Speaking to Sunday Times, Jean Baptiste Hategekimana, the Chairperson of Rwanda Youth in Agribusiness Forum (RYAF), said that the project will help young people grow their businesses.
"People starting businesses do not get loans easily, which is a problem per se. There should be ways to gradually fund start-ups as they grow,” he said.
March 2018Monetary Policy and Financial Stability Statement released by the National bank of Rwanda shows that at the end December 2017, only 1.5 percent of banks loans went to agriculture, while mortgage got the highest share of loans (37 percent).
Yet, agriculture contributes a large share of about 30 percent to Rwanda’s Gross Domestic Product (GDP), constitutes a source of livelihoods of about 70 percent of Rwandans, and accounts for the biggest part of the country’s exports revenues.
Agriculture shocks, related to bad weather conditions and other factors such as crop and livestock diseases, are among the reasons that make banks are reluctant to lend to the sector.
Speaking during the launch of the activity on Thursday, September 20, 2018, in Kigali, the US Ambassador to Rwanda, Peter Vrooman said that this project seeks to address discrepancy between the number of people engaged in and living by agriculture and small funding going to the sector.
"One of the main barriers of sustainable growth in agribusiness sector is the limited availability of financing, that’s a challenge in many developing countries,” he said adding that young small or medium size businesses also face a huge burden of staggering interest rates and collateral requirements, the issues which the new effort seeks to address.
Highlighting sometimes farmers have no capital to invest so that they get good yields, he said that thanks to the programme, farmers can get agriculture inputs on creditsuch as quality seeds, agriculture mechanisation and irrigation equipment for improved farm productivity.
The Permanent Secretary at the Ministry of Trade and Industry, Michel Sebera, said the project targets sectors such as agro-processing, logistic transport that supports agribusiness, and access to finance.
"We strongly believe that Nguriza Nshore project will contribute a lot to achieving our national development targets,” Sebera observed.
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