A Business Development Fund has been established as a vehicle to support start-ups by providing credit to SMEs without collateral. BDF has a $13.4 million budget and is expanding into rural areas with branches being established in all districts in the country.
BDF will be working with budding businesses to provide advice on a wide range of skills such as how to start and grow businesses; basic ICT skills; using the internet to access market information; business development skills for entrepreneurs; BDF will help introduce clients to partnering banks and support them in a successful application for the bank’s services. BDF also offers a guarantee fund for four categories of applicant, including one specifically for SMEs. The fund guarantees loans issued by participating financial institutions to SMEs.
The most promising and responsive financial institution to MSME needs has been Umurenge SACCO. The establishment of U-SACCO has significantly changed the landscape of access to formal financial institutions in Rwanda as the findings of the Finscope survey (2012) revealed.
Financial exclusion had reduced from 52.4 per cent to 28.1 per cent since the introduction of U-SACCOs. SACCO members increased from 694,615 in 2010 to 1,685,730 in 2013 and savings have increased more than five times from 6,322,267,782 Rwandan Francs in December 2010 to 36,703,659,691 Rwandan Francs in December 2013. This growth contributes to widened access to credit for households as well as for SMEs. In the future the establishment of a SACCO Cooperative Bank will play a critical role in financing projects for start-ups and growing SMEs to achieve self-reliance.
Collective investment schemes involve a group of investors pooling resources together to collectively invest their money in larger projects, stocks, bonds, treasury bills, and other securities under expert guidance. This allows individuals or SMEs to invest in projects as a group that they would not normally have the funding to support alone. In Rwanda, the initiative to encourage CIS has resulted in 54 being established in total which includes 22 new investment ideas. 64 per cent of collective investment groups have chosen to invest in real estate projects.
The Ministry of Trade and Industry is working with SMEs to provide market information and support services through the Exporter Development Programme which comprises three components, all of which prioritise companies most likely to export.
Firstly, the Export Capacity component provides selected companies with help designing and implementing export marketing plans, the Market Linkage component works to put Rwandan companies in front of potential clients and help them generate new export sales.
Lastly, the Export Advisor component aims to improve the ability of a group of experts to provide export-focussed consultancy services to existing and potential exporters. The overall impact of the Export Development Programme is to boost the ability of SMEs to export within the region and further afield.
For firms that have their eye set on exporting, they must ensure that their products meet standards in foreign markets. To help with this Rwanda Bureau of Standards is assisting firms with certification of required export standards and is also working to harmonise national requirements with EAC and COMESA countries standards so that RBS can increase the number of products certified.
Through these strategic choices, the Government of Rwanda is working to support the private sector grow, and particularly SMEs. The range of support being provided to small firms to help them survive and thrive is wide, but on its own it is not sufficient to ensure their success.
The success of an individual SME is heavily dependent on the skills of the business owner and how sharply focussed the business is on understanding and responding to its target market. A combination of visionary managers and a clear understanding of what customers need is what will ensure SMEs can remain successful and relevant over the longer term.
The author is Permanent Secretary, Ministry of Trade and Industry