Private equity outfit, Fusion Capital LTD, recently opened shop in Rwanda. Fusion is a non bank institution which specialises in the financing of Small and Medium Enterprises (SMEs). Kajuju Kageenu, the company’s Business Manger Rwanda Office talked Business Times’ John Gahamanyi about the challenges in SME financing as well as the company prospects for the Rwanda market.
Below are the excerpts:
Qn: What are your priority sectors?
Fusion is not sector specific, we fund businesses across all sectors but we avoid businesses that have negative social impact (unethical businesses).
Qn: Access to finance in Rwanda is one of the biggest challenges to SME growth especially the ones in agriculture, a sector that is perceived to be highly risky by most financiers. What distinguishes you from the rest?
Fusion is a long term investor, we are aware of the risks in most sectors including agriculture. We therefore structure finance to fit the business requirements, we do more than disbursing money, we get involved at the board level (Strategic Decisions) and at the Management Level (Strategy Implementation Level).
We identify competence gaps in management and outsource to fill up these gaps to make the management more effective.
We seek to understand the business and the entrepreneur and walk with them through the various stages of growth.
Qn: Do you think government has a role to play in facilitating access to finance for SMEs?
Yes, this is through creating a conducive legislative and regulatory environment, and we are pleased to note the development of the SME Fund by the Government of Rwanda.
Qn: From your experience, what are the major challenges for equity financing in East Africa?
The challenges range from there being no clear understanding of what private equity is, the second challenge is that most businesses are family businesses and hence relinquishing part of the ownership can be a big ask for most businesses.
The third challenge is weak management teams and lack of proper business structures and controls, the separate entity concept is not observed hence the entrepreneur and the business are seen and treated as one entity.
Qn: What is the size of your investment in East Africa and how much do you have at your disposal for the Rwandan market?
Fusion has invested over Rwf2.8 billion across in Kenya and Rwanda; most of these investments are however in Kenya. Fusion has a fresh fund of US$30 million (Rwf18 billion) to be invested across East Africa.
The amount to be invested in each of the three countries purely depends on the opportunities. Rwanda businesses have therefore access to Rwf18 billion if they present good businesses.
Qn: Looking forward what are your expectations from the Rwandan market?
Rwanda has proved to be a growing economy with aggressive businessmen. It is also strategically placed to serve Burundi and Congo.
We expect to grow the SMEs in Rwanda to enable them compete with other SMEs in the region and be able to serve the said market.
Qn: What major challenges do you foresee?
I don’t foresee any unique challenges different from what we have faced in Kenya and Uganda and hence we are adequately prepared to face challenges such as weak management team.
We will back them and partner with others. The business size may also be smaller but as long as it fits our definition of an SME, then we will be ready to finance it.