Banks have increasingly rolled out financing products aimed at supporting small businesses and startups, with some marketed as collateral-free solutions designed to widen access to credit. Yet entrepreneurs say that once they begin the application process, the conversation often circles back to the same collateral requirement. As a result, many founders argue that access to finance remains out of reach for businesses that lack land, buildings, or other assets that banks can use as security. ALSO READ: Who stands to benefit from Rwanda’s $100m SME fund? “I have personally approached a bank for a loan facility that was advertised as collateral-free, only to be told that collateral was still required. There is often a lot of bureaucracy and back-and-forth, but ultimately the discussion returns to the same question: what security can you provide?” said Deexon Muhizi, founder of iGiTREE, a genealogy and genetic platform. Muhizi said the challenge extends beyond collateral requirements. Startups are still building credibility and often lack the guarantees and track records lenders seek. “Besides collateral, they ask who can guarantee you, who knows you, where you come from. Most startups simply do not have those things. If an idea is viable, banks could consider taking equity instead of demanding land or buildings. That way, they become partners in the growth of the business and can benefit from its future success,” he said. Muhizi pointed to investment-readiness initiatives such as the Investment Clinic under the Rwanda Stock Exchange ecosystem, which help entrepreneurs improve governance, financial documentation, and credibility before approaching investors or lenders. “These programmes help SMEs prepare the paperwork and structures that investors want to see. In many cases, that credibility should matter as much as collateral,” he said. Cedric Mupenzi, founder of Sinc Today, an all-in-one platform for event discovery, said the difficulty stems from a mismatch between how banks operate and how startups create value. “Startups sell a vision, which is not something you can easily value or use as collateral,” he said. According to Mupenzi, traditional lending models are built around fixed assets that can be seized in the event of default, while startups often possess little more than intellectual property, innovative ideas, and growth potential. ALSO READ: SMEs urged to look beyond bank loans for funding While some financial institutions are exploring new approaches to startup financing, he said more can be done to develop products that reflect the realities of early-stage businesses. “When you finance a startup, you are financing a future possibility. That requires a different mindset. Some institutions are beginning to understand this and are looking at ways of supporting startups beyond traditional loans,” he said. Rather than conventional loans, he suggested startups may benefit more from investment-oriented financing structures that share both risks and rewards. However, he acknowledged that such models may not align neatly with the traditional business model of commercial banks, which primarily earn income through lending. Economist Teddy Kaberuka said the concerns raised by entrepreneurs point to a broader structural challenge within the financial sector. “The reality is that many products designed for SMEs are not aligned with their capacities. That is why some applicants begin the process but fail midway when they encounter requirements they cannot meet,” he said. According to Kaberuka, Rwanda’s financing system remains heavily collateral-based, making it difficult for startups and small businesses to access credit. “The current model is simple: provide collateral and receive financing. But startups often do not have collateral. That means they are effectively locked out of funding until they accumulate assets, which defeats the purpose of supporting young businesses,” he said. Kaberuka noted that some countries have adopted more flexible lending models tailored to small enterprises. “In places like Kenya, banks have products designed specifically for small traders. Some even provide short-term daily loans to vendors and collect repayment at the end of the business day. They finance the business activity itself rather than relying entirely on collateral,” he said. Such approaches, he argued, enable entrepreneurs to access working capital based on cash flow and business performance rather than ownership of physical assets. “There are many businesses that simply need operational capital. A restaurant may need money to buy stock for the day. A trader may need cash to purchase inventory. Those are the kinds of gaps financial institutions should be helping to fill,” he added. Beyond lending, Kaberuka said banks could strengthen support for SMEs by offering advisory services to help entrepreneurs improve financial management, reduce risks, and grow sustainably. “The relationship should not end with giving money. Banks should also guide entrepreneurs on how to manage financing, understand risks, and grow their businesses successfully,” he said. Experts say improving SME access to finance will require more than launching new products. For many small businesses, the real test is whether financing models can evolve beyond asset-based lending to recognise business potential, cash flow, and innovation as bankable forms of value. The New Times sought a comment from the National Bank of Rwanda on how it addresses complaints from customers who say financial products are being offered on terms that differ from those advertised. No response had been received by the time of publication.
