Rwanda Development Bank (BRD) has said it is in the process of setting up a Rwf2,5b “SME Development Fund” in a move that will make it attractive for financial institutions to increase lending to Rwanda’s Small and Medium Enterprises (SMEs).
The fund comes at a time government has adopted an SME policy that will provide a mechanism for facilitating SMEs to access appropriate business financing.
In an interview with Business Times yesterday, Jack Kayonga, the Managing Director of BRD said the Fund through which BRD will provide guarantee of up to 50 percent of the loan for an SME and Rwf100million per SME or individual, will be also supported by government.
“Government is bringing in different funds such as the Agriculture Guarantee Fund. We are finalizing the documentation and we intend to have it functional by beginning of October,” Kayonga said.
“We are open to work with different financial institutions. There are two significant things that are critical for the development of SMEs - technical assistance through capacity building and collateral,” he
BRD in which government is the biggest shareholder with 38.8 percent shares aims at eradicating poverty especially in rural areas through investment in agriculture and other projects.
“This will definitely increase the appetite of the banks. It will be open to all financial institutions – if the institution is willing to finance an SME but not comfortable with the collateral or need technical assistance we will provide that,” Kayonga explained.
Kayonga observed that with most SMEs still in “incubation stage”, technical assistance will come to bridge the skills gap and facilitate them to grow.
“To grow (SMEs) them to maturity requires teaching them good business practices in terms of managing the whole value chain from production to the market.”
The Fund will be open to all SMEs, though the bank would like to see “a good element” of value addition, he said.
BRD has been investing in various sectors including education, energy, health, tourism and agriculture.
Since 2003, the bank has been supporting farmers in form of soft loans to build coffee washing stations and the expansion of their business.
This year approximately Rwf4 billion is available in loans for export promotional funds including coffee, which is one of Rwanda’s top revenue earners.