Editorial: Exploit all avenues for private sector financing

The high cost of borrowing has long been cited as one of the obstacles to entrepreneurship and investments in Rwanda.

The high cost of borrowing has long been cited as one of the obstacles to entrepreneurship and investments in Rwanda.

From individuals to cooperatives and joint ventures, many continue to grumble over the high interest rates at which commercial banks extend credit to loan-seekers.

But private players in certain sectors, such as energy and mining, have also claimed that financial institutions have practically ignored them altogether.

They claim that their project proposals are often turned down or applicants wait for too long before getting feedback because bankers lack the technical capacity to analyse the proposals and determine whether they are actually profitable or not.

With lending rate standing at more than 17 per cent in most commercial banks, the argument that the rate is prohibitive makes sense.

On the other hand, banks have pointed to the continued rise in non-performing loans (reported at 8.2 per cent in June 2017, according to the National Bank of Rwanda), which constitutes a genuine concern for the sector.

In some cases, the government has intervened to help individual prospective entrepreneurs – mainly youth and women – who lack collateral to access funding through a guarantee fund. A similar facility has been extended to businesses in the export sector.

This is commendable.

The same spirit should however be extended to all the priority sectors of the economy such as energy. But it may not always be possible especially when the money involved is too much.

There is need for engagement among all the stakeholders to devise strategies on how private operators in key priority sectors of the economy can access funding, whether from local or foreign sources.

Local firms should also seek strategic partnerships with foreign companies and use Rwanda Stock Exchange to raise equity.

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