Covid-19: How recovery funding will be disbursed

Workers at Apparel Manufacturing Group Ltd make facemasks in Kigali recently. The central bank has issued guidelines on disbursement of funds meant to accelerate rebound of businesses hit hardest by the Covid-19 pandemic. Photo: File

The National Bank of Rwanda has issued guidelines on disbursement of bailout funding meant for businesses hit hardest by the novel coronavirus pandemic. Government has put in place the Economic Recovery Fund aimed at shoring up business as the country emerges from months of tough Covid-19 restrictions.

The total value of the fund is estimated at over $200 million (approximately Rwf186 billion) with the Government injecting an initial $100 million to support local businesses to recover from the economic effects of the pandemic.


According to a letter by the Central Bank to all the 16 local banks as well as Limited Liability Micro-finance institutions, the fund will be disbursed through local financial institutions. Some funds to financial institutions for disbursement will be subject to interest rates while others will be zero-rated.


The support will be in the form of credit at affordable rates between 5 and 8 per cent per annum and repayment periods ranging from 2 to 15 years (for hotels).


The application process for the funds, according to the letter signed by Central Bank Governor, John Rwangombwa, will see potential beneficiaries making applications to a financial institution of their choice.

The fund is for all categories of businesses, from Micro-businesses, SMEs to large corporations.

The fund will support businesses under three key windows; hotel refinancing to enable the restructuring of loans held by  hotels;  working capital for businesses most affected by COVID-19 to keep them operational and avoid lay-offs; Micro-business loans for SMEs and Micro-businesses affected by COVID-19.

Applications will be accessed based on a set of eligibility requirements such as their financial health prior to the shock such as no concerns raised in previous external audit reports or  no pre-existing threats to future cash flows.

Respective banks will conduct a case by case debt sustainability assessment. Other aspects likely to be considered include Rwanda Revenue Authority tax clearance certificate.

Following the application and review by a financial institution, the applications will then be submitted to the Central Bank for review (within 7 days) leading up to the final approval upon review against eligibility requirements.

 On approval, banks will disburse the funds to a borrower’s account then submit proof of the disbursement to the Central Bank who will then credit the Bank’s account with the disbursed amount.

According to the Economic Recovery Fund blueprint, which was approved by Cabinet on April 30, an estimated $50 million has been earmarked for restructuring loans to hotels which targets to allow for the refinancing of 35 per cent of total performing outstanding loans of the hotel sector that stood at Rwf134 billion for 571 borrowers as at end February.

Among the obligations for hotels will include retaining and paying employees as well as commitment to preserving jobs.

The fund will be disbursed to hotel owners at 5 per cent interest rate.

Funds for the support will be lent to banks without charge to ensure affordability on the part of beneficiaries.

 The combined effective interest rate for the hotels’ loans would reduce from an average of 16 per cent to around 12 per cent leading to a 24 per cent saving in annual interest expense for hotels over the loan term.

For working capital or line of credit, the central bank will lend to commercial banks at a 2 per cent interest rate while financial institutions will not exceed 8 per cent interest rates when lending to SMEs.

Stephen Ruzibiza, the Private Sector Federation Chief Executive told The New Times that the intervention is divided into sectors- so the most hit will receive a high proportion compared to others.

“What’s important is that all sectors were considered and will be taken care of within the available means,” he said.

Ruzibiza noted that the model of disbursement of the funds through banks is ideal as businesses already have a working relationship with the lenders.

Local business operators told The New Times that the fund comes in handy at a time when economic sectors are opening up and will avail the much-needed capital to get back up.

Michel Bayingana, who is involved in logistics operations and trade said that, following the lockdown, much of the operations had ground to a halt leaving little capital to keep the business afloat.

While there is demand by clients, he said that there is need for capital injection to enable the resumption of activities.

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