SMEs get sh5b boost

Jun 21, 2010

ACCESS to credit by small and medium enterprises (SMEs) has been eased following the guarantee of euro 1.6m (about sh4.5b) by the French Development Agency (AFD).

By Patrick Jaramogi

ACCESS to credit by small and medium enterprises (SMEs) has been eased following the guarantee of euro 1.6m (about sh4.5b) by the French Development Agency (AFD).

The risk sub-participation agreement was signed between AFD and Bank of Africa in Kampala last week.

One of the major problems facing SMEs is accessing credit from commercial banks. But the AFD move is expected to bring some relief.

Edigold Monday, the Bank of Africa Uganda managing director, said the bank would give credit to SMEs with ease.

“The difficulty in attracting finance from commercial banks is due to the inability of most enterprises to provide sufficient security that loans will be repaid on time and in full. With these funds, the risk has been reduced,” she said.

She said the partnership scheme would guarantee up to 50% of the loans issued to qualifying SMEs.

“The guarantee has the effect of reducing the credit risk exposure and will therefore enhance the banks lending capacity to SMEs,” she said.

Rene Forceville, the French ambassador, said the partnership was fulfillment to the French government mission of financing overseas development.

“AFD aims are supporting social and economic development, poverty reduction and preservation of the environment,” he said.

Forceville explained that the guarantee would serve as a risk-sharing tool for banks, which will later enhance support of the SMEs.

The AFD regional director Jean –Pierre Marcelli said they would double the funds if Bank of Africa handles the credit scheme effectively.

“We feel sustainable development can not be reached in Uganda without support to the SMEs as creators of jobs and value addition,” he said.

Bank of Africa becomes the second financial institution to get support from AFD after the dfcu Bank sealed a similar agreement for $15m (about sh33b) under a seven-year credit line to help in stimulating the growth of businesses in Uganda early this month.

Proparco is the private sector arm of the French Development Agency Group, the official French bilateral development financial institution.

(adsbygoogle = window.adsbygoogle || []).push({});