Entrepreneurship: You can't have your cake and eat it

Different initiatives have been mooted to make available more opportunities for the youth to pursue their dreams as entrepreneurs and create more jobs. But in the long run, how sustainable are these enterprises?
Entrepreneurship looks no bounderies. The New Times / Courtesy.
Entrepreneurship looks no bounderies. The New Times / Courtesy.

Different initiatives have been mooted to make available more opportunities for the youth to pursue their dreams as entrepreneurs and create more jobs. But in the long run, how sustainable are these enterprises? Government, through the Hanga Umurimo project, hired skilled personnel (service providers) and placed them in the four provinces to help those with good ideas to turn them into viable projects, the trainees can barely defend their business plans. It is evident that they can not explain what the project is all about, how they run it, pay the loan and attain the core objective of creating jobs and improving the community around them.

To overcominge the challenge, the Ministry of Trade and Industry and financial institutions supporting SMEs have an unenviable task in pursuit of this goal.

The battle constitutes the establishment of viable, sustainable and quality assured private entities in the country to function effectively alongside the yet to be established businesses in the region as we integrate more.

Major challenges

The persistent challenge remains diversion of funds from the original idea reflected in the business plan.

The Executive Secretary of Imbaraga farmers’ federation in the Northern Province, Joseph Gafaranga, says the bigger challenge is replication of what their relatives or friends are doing without any research or knowledge about that particular business.

According to Gafaranga, lack of entrepreneurial knowledge is also a key challenge that pushes farmers to redirect loans into other aspects like painting or renovating houses.

“Other than giving out loans, banks should take initiative to educate the public on how and when to use the loan,” Gafaranga points out.

SME Senior Development Advisor, Livingstone Nkuusi says most businesses die out because business operators do not understand the market they operate in.

 “You find that most entrepreneurs start a business because they saw a friend or a neighbour  doing the same. They compete for the same market, where the only difference could be pricing, hence having no competitive advantage over any business in the same sector,” said Nkuusi.

Reports indicate that others die out because they are run by non professionals and inexperienced people with less knowledge of business management and even poor supervision.

Careful planning

In the past, Small and Medium Enterprises suffered because they lacked collateral and capacity to develop bankable projects, thus hindering many entrepreneurs to access financing. But this is no longer a problem after government introduced Business Development Centres in 30 districts and service providers in the four regions of the country.

Johan Eriksson, the Programme Director of Educat, says that careful planning is crucial for entrepreneurs but should go hand in hand with the ability to take risks, change ones plan when necessary and constantly adjust to the changing environment.

“This is the generics of an entrepreneurial mindset and this mindset is what we see as lacking the most in Rwanda and is what Educat is constantly working hard to change,” Eriksson observes. 

In the turnaround programme, the Ministry of Trade and Industry forwarded  20 failed SMEs to BDF for the latter to study each case and advise accordingly.

Among the companies, two are said to have been taken to court by commercial banks, while another two are in negotiations for buy out plans.

“We study their business plans, analyse their financial projections and advise them accordingly, and where necessary negotiate with banks on their behalf,” explains Janet Kanyambo, Fund Manager at BDF in an interview with The New Times.

Capacity Enhancement

Business Development Centres are entities set up by government to facilitate SMEs in planning and capacity building. The centres prepare and nurtures entrepreneurs to start and grow businesses with ethical values.

Also through the Hanga umurimo programme, service providers are recruited and placed in the rural four provinces of the country.

However, some entrepreneurs fail to maintain the required quality standards of business management and defend their investments.

In one of the occasions when the Ministry of Trade and Industry officials met with entrepreneurs and commercial banks, bankers complained that business owners had failed to defend their business proposals.

“Such challenges are there but we hope through continued mentorship and guidance from various stakeholders, it will be reduced over time,” Nkuusi says.

Government, development partners and the private sector should increase collaboration and share expertise in order to deliver a platform for entrepreneurs that will increase potential for success.

Previously, when commercial banks started to open up to SMEs, things looked rosy but today, for entrepreneurs, the requirements for prospective loan candidates have since been tightened to minimise the risks.

In the past, an entrepreneur would apply for a loan to acquire machinery or equipment to improve on production but this has since changed as banks today pay directly to the suppliers a move that has not gone down well with many businesses.

This has prompted some of the clients to threaten to withdraw their loan applications.

Experts suggest that in order to increase the chances for entrepreneurs who receive their first loan to succeed, access to professional mentorship is needed along with tailor-made training and a dynamic incubation environment.

They believe that failing is what makes people learn the most, and entrepreneurs who have not made the grade and have the courage to share experiences about their failures are also more likely to succeed in the future.

 

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