SMEs to secure sh38b in loans

By Samuel Sanya

The European Investment Bank has signed two deals worth 11 million euros (sh38b) with dfcu Bank and KCB Rwanda to provide cheap financing for micro, small and medium enterprises.

Pim Van Ballekom, the European Investment Bank vice-president for Africa, said the long-term loans will boost economic growth in East Africa and create jobs for the region’s youthful populations.

“Availability of cheap finances to small and medium enterprises will work as a motor to create new jobs,” he told reporters at the Serena Hotel.

dfcu Bank Uganda will receive five million euros (sh17b) to lend cheaply to Ugandan entrepreneurs. Juma Kisaame, the dfcu Bank boss, noted that loan applications are already being received.

He said the loans are for only SMEs in all sectors, except construction and personal loans, at below 20% interest for up to six years.

“There is a shortage of long-term loans. This financing bridges that gap. The cost of this money is cheaper than our other sources and the loans will be set at affordable rates,” he said.

The average commercial bank lending rates have edged up from 22% to 24% at the end of July, while the Uganda Development Bank (UDB) is providing loans at 12.5%. 

dfcu Bank and five other Ugandan banks received a 40m euro line of credit from the European Investment Bank in 2011. Kisaame revealed that all the money has been lent out at 16% interest for up to eight years. 

Maurice Toroitich, the KCB Rwanda boss, noted that the funding will boost small businesses in the East African Community to accelerate regional integration efforts.

Van Ballekom will meet key government ministers, officials and diplomats in Kampala with a high level delegation from the European Investment Bank before he departs for Luxembourg. 

He is expected to announce significant new financing agreements to support small business and micro-finance investment, as well as support crucial transport infrastructure.