Mastercard Foundation and Financial Sector Deepening Uganda (FSD Uganda) on Thursday, February 24, 2022, launched the Micro and Small Enterprise (MSMEs) Recovery Fund that is expected to provide the much-needed capital to small scale businesses that were hit by Covid-19. 

A total of $20 million (about Shs70 billion) has been set aside under the initiative to offer capital to over 50,000 MSMEs, which are mainly youth and women-owned.

ASIGMA, a management and financial advisory firm, will manage the fund.

According to the Executive Director of FSD Uganda, Ms Rashmi Pillai, their research established that many MSMEs closed due to Covid-19 and those still running are limping.

“The MSE Recovery Fund was a result of the FSD Uganda 5-waves COVID-19 studies. The studies show that while most people returned to jobs by late 2020, the quality of jobs declined, and net pay was still below pre-pandemic levels for nearly 73 per cent of surveyed adults. Individuals and households that worked for and with MSES were the worst hit,” Dr Pillai says.

Executive Director of FSD Uganda, Ms Rashmi Pillai, speaks at the launch of the Fund.

She adds that beneficiary SMEs will receive credit worth between Shs100,000 and Shs10 million, which will be delivered through participating microfinance institutions and SACCOS (Tier III and Tier IV financial institutions).

“That’s why the facility is intentional in targeting micro and small enterprises whose credit needs fall between Shs100,000 to Shs10 million. We are confident that this facility will be an excellent complement to the Government of Uganda’s Small Business Recovery Fund,” she adds.

Mr Adrian Bukenya, the Country Head MasterCard Foundation Uganda, emphasizes the foundation’s commitment to enabling 3 million Ugandans to access dignified and fulfilling work by 2030 through driving access to finance, education, skills and training.

“MSMEs are a significant driver of employment in Uganda. So, as the Foundation looks towards enabling 3 million young Ugandans to access dignified and fulfilling work by 2030, we know we can only get there by addressing the residual effects of the pandemic on MSMEs. This facility is about standing with the individuals and businesses that are the backbone of our economy as they bounce back,” he says.

While appearing on 360 Mentor Africa, a talkshow on Twitter spaces hosted by Robert Kabushenga on Thursday, 03 March 2022, Mr Daudi Nanambi, the founder and Executive Director of ASIGMA, the facility manager, said qualifying MSMEs will be able to access loans from selected Microfinance Institutions (MFIs) and SACCOs that are participating in the Fund.

Mr Daudi Nanambi, the founder and Executive Director of ASIGMA, the facility manager, speaks at the launch.

Mr Nanambi said in order to qualify to benefit from the Fund, MSEs must be registered and operating in Uganda, must have evidence of operating in priority sectors of agriculture, light manufacturing, construction, tourism, health, education, trade and services.

He explained that credit ranges between Shs100,000 and maximum is Shs10 million.

 “Accessibility of loans will be ensured due to the following factors: 1. MFIs and SACCOs will be selected based on their existing target market. This means their existing loans should already be serving such businesses to prove they know how to lend to target beneficiary,” he says.

“The program will rely on existing loan process used by the MFIs and SACCOs. MFIs and SACCOs with existing wide geographical spread will be preferred to reach target MSEs nationwide,” he explained.

According to Nanambi, they will use technology to automate the loan portfolio management to ensure efficiency.

“Digitization is key to building resilience of the financial institutions. They will be supported to automate their loan process flows and digitize loan portfolio management to improve operational efficiency and performance visibility,” he said.

The Ministry of Finance Permanent Secretary and Secretary to the Treasury, Ramathan Ggoobi, welcomes the new fund, saying it supplements government recovery funds.

“It is so relevant given that it is targeting the most vulnerable and financially excluded. I am glad to know that the fund also targets strengthening the grassroots financial institutions that on-lend to micro, small and medium enterprises. This will cause a positive ripple effect and a significant boost to the Ugandans who benefit from these businesses,” he says.

“Therefore, I call upon the eligible businesses to take advantage of this recovery fund we are launching today and other Government initiatives to boost their businesses. I also caution them to deploy the credit for its intended use,” he adds.