Last year, government launched the export growth facility fund as part of the strategy to boost exports and narrow down the widening trade deficit gap.
The aim according to Francois Kanimba, the Minister in charge of Trade and Industry was to channel more than Rwf1 billion, through the Development Bank of Rwanda (BRD), to facilitate exporters especially through SMEs .
Exporters would then access the funds at about 8 per cent interest per annum, covering at least 50 per cent of the cost exporters incur as they try to seek new markets abroad.
More importantly, the fund was designed as a single facility with three separate windows including investment catalyst arm, the matching grant fund for market entry related costs, and the Export Guarantee Facility.
To implement this facility, Rwanda’s Development Bank (BRD) further agreed to unveil the facility through other financial institutions such as BPR, I&M Bank, EcoBank and Urwego Opportunity Bank.
The overall objective, according Minister Kanimba, was to try and broaden the range of financial services of Rwanda’s formal finance sector but also facilitate access of export-oriented SMEs (with a turnover ranging between 50,000 to 1M$) with growth potential to tailored export finance products and services.
However, almost a year since the facility was first launched, Benjamin Manzi, BRD’s Head of investments, says the turn up is still low despite the availability of the money.
“We have gone ahead to reduce the interest rates from 16.5 per cent to 10 per cent to facilitate the export sector but still the number of those coming for the money is still low,” Manzi told Business Times adding that exporters should stop complaining about lack of funds and rather go get the money because its available.
The question should rather be why they are not coming for the money, which has been subsidized, he added.
Manzi says they are also offering technical support and facilitating exporters to go and seek markets around the world on top of guaranteeing exporters by almost 70 percent.
“The EGF is meant to facilitate firms in the horticulture, agro-processing, artisanal mining and manufacturing sectors, so we want to ensure that we assist players in this sector to become more innovative and boost their productivity by availing them both credit, the grant, plus the guarantee in other banks,” Manzi said.
Why exporters can’t access the money
Despite BRD’s efforts, some exporters still say it is hard to actually access credit from the facility.
They accuse the banks of putting stringent and bureaucratic processes before one can actually have the money. Most exporters interviewed say banks are actually not availing money and when they do, the cost is always high.
“The challenge is often on the procedures which are always bureaucratic and intensely demanding. This often demotivates those that may want to tap into the facility,” a Kigali based exporter told Business Times on condition of anonymity adding that It is easy for banks to tell you we are giving money, but to actually get the money is another different thing.
“BRD’s current procedures are so stringent and most probably, that is why exporters are not interested,” he said.
Beneficiaries speak out
However, Donatille Nibagwire, the Managing Director FLORIS export company, exporting horticulture produce to the Middle East And Europe, says after presenting all the required documents, she was able to secure the funds she used to invest in her business.
“She says it’s not true that the procedures are too stringent especially once exporters have all the necessary requirements,” she said adding that it was actually BRD that approached her with the assistance.
“It was actually BRD that looked for me after knowing about my business and inquired if I wanted any credit assistance, she said, urging exporters to always have their documentation right.
BRD says it has helped connect exporters like Nibagwire and others with grants to go and conduct market surveys abroad.
According to BRD, the beneficiaries should meet the principle requirements such as being a registered Rwandan SME (with a turnover ranging between 50,000 to 1M $) operating, owned and controlled in Rwanda and must be operating in horticulture, agro-processing or manufacturing sectors.
The facility also supports those in artisanal mining and manufacturing among other sectors
According to sector experts, encouraging more exporters to take full advantage of the facility is critical for the sustainability of Rwanda’s export industry.
For- example by subsidizing loans at 10% interest per annum it means a reduction on the market average interest rate of 16.5% since EGF will pay the extra 6.5% which is an important milestone towards boosting the industry.
Export targets by NAEB
The National Agriculture Export Board (NAEB) is projecting to fetch more revenues from tea exports, from $65 million (about Rwf44.2b) to $147 million (about Rwf100b) by 2017, while coffee export earnings are expected to more than double from $73 million to $157 million during the same period.
This will however require concerted efforts including facilities like the Export fund.
Government also plans to enhance honey, handcrafts and horticulture production and exports as part of the new strategy. Lack of access to affordable credit is only part of the problem, according to business analysts. The country’s export industry is still struggling with challenges, including, limited market, high taxes, poor export infrastructure and lack of skilled manpower.
The imbalance between exports and imports has greatly affected the country’s trade books.
For-example, according to the National Bank of Rwanda (BNR), total exports dropped in value by 2.4% in the first half of 2016, to $268.57 million from $ 275.12 million, after a decline of 6.3% in the same period of 2015, as a result of poor performance recorded by the mining sector -36.6%, tea (-5.7%), coffee -9.2% among others.
There is hope that providing access to finance at competitive prices for Export oriented SMEs while improving knowledge of SMEs on export related finance via technical assistance will greatly enhance Rwanda’s export sector.