Export Growth Fund (EGF) to ease access to finance for exporters

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Alex Kanyankole, CEO of Development Bank of Rwanda.

Export growth is a top priority for the government and as such various measures have been taken to boost Rwanda’s export trade. The Second Economic Development and Poverty Reduction Strategy (EDPRS 2), targets an annual export growth of 28%.  In an exclusive interview, ALEX KANYANKOLE, CEO of the Development Bank of Rwanda (BRD) talks to The New Times’ MINNIE KARANJA on  how the Export Growth Fund is strategically designed to address the challenge of access to finance by exporters and  promoting Made in Rwanda products. Below are excerpts of the interview.

KARANJA: How is BRD strategically positioned to increase exports, especially agricultural exports in line with the government’s targets?

KANYANKOLE:  The bank is dedicated to supporting financially viable export projects across all sectors of the economy. A specialized department was established in 2015 with very well trained staff to professionally assess the projects and give sound advice to exporters seeking financial and technical assistance to grow their businesses.

We are keen to increase Rwanda’s agricultural exports because we recognize the potential of the agricultural sector in growing our economy and even creating new jobs for youth and women, which is very important. We have a dedicated agriculture financing department that works closely with individuals and companies in agriculture export, as well as SACCCOs to increase access to finance for exporters.

Products in agriculture financing focus on the entire agriculture value chain right from primary agriculture to input financing which aims to increase production of crops and livestock. We are also investing in irrigation mechanization to ensure that farmers – especially of horticulture produce- do not depend on rain-fed irrigation and can therefore harvest all year round.

The horticulture export sector alongside artisanal mining and manufacturing for value addition are one of the most underfunded sectors which struggle to access finance. BRD has designed the Export Growth Fund (EGF) to support these sectors and the export sector as a whole to address the existing trade deficit.

KARANJA: Exporters often decry limited access to finance, how does the EGF address this issue?

KANYANKOLE: The Export Growth Fund is a facility which is aimed at facilitating export oriented SMEs to access finance by offering interest subsidies on investment loans, grants for market penetration and credit insurance guarantee to boost export volumes and access new markets.

The EGF Investment Catalyst facility supports exporters by subsidizing the cost of interest to investments through direct lending on government funds at 10% and on-lending to increase channels through which SMEs can access funding by working with local commercial banks. We signed a loan agreement with I&M Bank and BPR part of Atlas Mara, to use this model where export oriented SMEs will not only access finance but also technical support on how to grow their businesses.

While the Investment catalyst facility eases access to finance for exporters, EGF’s matching grant window has been designed specifically for exporters to access new markets. We realized that to grow exports we also have to support exporters to access new markets. We therefore give grants of up to 100,000 US dollars per individual to enable them obtain various product certifications and standardizations, develop business plans, conduct professional market research and even attend trade fairs - which are important platforms for them to meet prospective international importers. This grant matches to the tune of 50% of exporter’s total expense to penetrate external markets.

We also have the credit insurance guarantee in the pipeline which will cater for pre and post shipment financing to address a recurrent issue of working capital which limits exporters. We will work with commercial banks to offer credit insurance guarantee so that they can sustainably lend exporters with working capital during pre or post-shipment financing.

KARANJA: How is BRD strategically positioned to manage EGF?

KANYANKOLE: In November 2015 The Ministry of Trade Industry and East African Community Affairs (MINEACOM) signed a Memorandum of Understanding with the Development Bank of Rwanda (BRD) to manage the Export Growth Facility (EGF).

We have a specialized and dedicated department with highly trained staff to support Rwandan exporters scale their businesses. In line with this we have signed an MOU with the Private Sector Federation (PSF) where we have set up a technical desk at PSF headquarters fully sponsored by the bank.

In collaboration with commercial banks, we shall try to reach export oriented SME’s and with the support of KfW, we shall provide technical assistance to these PFI’s to improve their knowledge and expertise to serve the SME’s better.

KARANJA: What success has EGF realized in promoting Rwandan exports so far?

KANYANKOLE: We have successfully managed the EGF for about one and a half years now. We continuously engage with Rwandan exporters through MINEACOM to sensitize them on the benefits of EGF and understand their unique needs.

The MOU signing of the on-lending model with I&M and BPR is a great achievement. We are confident that through this on-lending model even more SME oriented exporters will have the necessary funding to boost their businesses.

Furthermore, BRD has invested 1.5 billion Francs and mobilized funds totalling to 8.5 million Euros from KfW which will be re-financed to commercial banks to increase access to finance for Rwandan exporters.

The fund has grown through mobilising resources from development partners. Resource mobilization and government continued support is expected to grow the fund to tackle export issues.

KARANJA: Under the matching grant window which new markets have Rwandan exporters penetrated?

KANYANKOLE: The matching grant has enabled exporters to obtain certifications and standardization for horticulture produce. Currently we have exporters trading in Belgium, Dubai, and United Kingdom.

KARANJA: What limitations is BRD facing in utilization of EGF by Rwandan exporters?

KANYANKOLE: Every new product in the market meets challenges. To start with, the fund is limited to export oriented SMEs. However, exporters need the fund to open up to all exporters. The fund was initially designed to increase access to finance by those SMEs in exports that were having difficulty to access funding. Studies showed that SMEs with less than 1 million US dollar turnover had more of the problem to access the funds, but discussions with other stakeholders are underway to make funds accessible to other exporters.  Secondly, this fund solves the issue of access to finance, but there are other challenges that exporters meet such as value chain challenges, commodity prices and climatic challenges especially for horticulture produce.

Thirdly is the fact that Rwanda’s industrial and manufacturing sector is still developing so locally manufactured goods are in low supply.

Finally, we have few exporters who venture into new markets. In order to increase the uptake of the fund, we have signed with commercial banks so that SMEs have increased access to the fund. Exporters have requested that the fund opens up to all exports and as a result we are redefining the eligibility criteria in consultation with stakeholders to encourage new exporters to take advantage of the fund.

KARANJA: What should we expect from BRD in 2017 in regard to export growth?

KANYANKOLE: We will continue to create more opportunities for export financing and products tailored to address the changing landscape of the export market to promote Made in Rwanda products in international markets. We will engage more with development partners and stakeholders to mobilize funds and scale up the on-lending model to commercial banks by signing more partnerships to increase access to the funds.

 

N.B: This is a sponsored article by BRD