There is a need to look into bank lending policies in the country, Members of Parliament said yesterday.
Members of the Chamber of Deputies standing Committee on Economy and Trade said this while meeting the Minister for Trade and Industry, Vincent Munyeshyaka and other stakeholders in the promotion of Small and Medium Enterprises (SMEs).
The session, which focused on National Employment Programme (Hanga Umurimo), was also attended by officials from the Business Development Fund (BDF).
MP Annoncee Manirarora said there was need for a fresh look at how banks and clients work together, adding that the current status was beginning to discourage potential SME investors.
According to the 2014 Business Establishment Census report by the National Institute of Statistics of Rwanda (NISR), micro, small and medium business community occupy 98 per cent while large businesses stand at only 2 per cent.
But SMEs contribute only 41 per cent in terms of creating jobs in private sector, due to several challenges such as access to finance.
“SMEs are the responsibility of the Ministry of Trade and Industry and it’s your duty to push them to do their part. However, we need to look at the laws and, where need be, revise them. When it comes to how banks are dealing with people, after, for instance, looking at how property is auctioned off after only 180 days, and that is really scaring off businesses, especially hoteliers,” she said.
In 2015, about 100 hotels were seized and auctioned off by some commercial banks due to failure to service loans, mostly selling at lower prices than the actual market value.
MP Emmanuel Mudidi said: “Every morning when you switch on the radio, all you can hear are announcements of properties that are being auctioned. The government can look into this because in the end, what we all are interested in is anything that will benefit Rwandans’ lives,” he said.
Addressing the challenges that are currently being faced by SMEs, Minister Munyeshyaka pointed out that there was still an issue of mindset on both the banks and the clients’ side.
“Mindset is still a challenge, especially with banks. They have failed to see the value of looking into the potential of the projects but are more interested in collateral. Lending can work a little differently if the banks can be a little bit more flexible,” he said.
Munyeshyaka also pointed out that with the pace at which SMEs were growing in the rest of the world, Rwandans interested in entrepreneurship need to let go of the mentality that the government would do everything for them.
Munyeshyaka advised BDF to try and follow up because when projects fail, the loss goes directly to the institution.
He also pointed out that though the programme has faced some challenges, it had learnt from its mistakes and had significantly improved.
The vice chairperson of the standing committe, Juliana Kantengwa, also urged vigilance.
“All I hear is that BDF gave out money. You must remember that you are not a financial institution. Your responsibility should be to provide guidance and holistic advice so that those you serve know exactly what they are dealing with since most are not really educated,” she said.
BDF CEO Innocent Bulindi said his institution’s core responsibility is to build confidence of the banks to invest in people who have no collateral.
“There are issues of financial literacy and inefficient business models. The bigger share of the agreement is between the client and the bank,” he said.
A total of 453 projects have been financed under the BDF framework to a tune of Rwf 4.8 billion.