Reform BDF to support Hanga Umurimo scheme

The Ministry of Trade and Industry plans to carry out major reforms in the operations of the Business Development Fund (BDF) in order to strengthen its capacity to effectively analyse the viability of private projects seeking loan guarantees. The move comes against the backdrop of rising numbers of businesses whose loan applications are being rejected by commercial banks on the account of poor cash management, bad credit history, low collateral among other issues that render business projects less bankable.

The Ministry of Trade and Industry plans to carry out major reforms in the operations of the Business Development Fund (BDF) in order to strengthen its capacity to effectively analyse the viability of private projects seeking loan guarantees.

The move comes against the backdrop of rising numbers of businesses whose loan applications are being rejected by commercial banks on the account of poor cash management, bad credit history, low collateral among other issues that render business projects less bankable.

BDF’s mandate is to support small and medium enterprises to access funding through credit guarantees as well as offer advisory services to enable them grow, generate jobs and support economic growth. It is therefore important that the fund builds capacity to fulfill its mandate effectively.

It is critical that entrepreneurs come to terms with the fact that it is not enough to accuse commercial banks of being rigid and selective when lending, but instead concentrate on making their projects attractive to lenders. In other words, banks are in business to make money through lending.

No banker, worth their name, is going to throw money in a business that cannot clearly demonstrate ability to absorb the borrowed funds, expand operations and generate profit. Regrettably some business people have used borrowed funds to fund luxurious lifestyles such as buying expensive cars instead of investing in the core business. Such borrowers have had problems servicing their loans.

BDF’s effectiveness in assessing projects, advising entrepreneurs and monitoring the use of borrowed funds is therefore a critical factor in the growth of SMEs, the backbone of our economy.

The intervention by the ministry is therefore a timely move that will get back on track the government-sponsored Hanga Umurimo (create your own job) programme aimed at creating a critical mass of entrepreneurs and off farm jobs.

 

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