Uganda Development Bank earmarks UGX 16b to support Women entrepreneur, SMEs

Small and medium-scale enterprises have got a credit lifeline worth UGX 16 billion from the African Guarantee Fund, as part of more efforts to strengthen businesses after the Covid-19 pandemic.

The African Guarantee Fund (AGF) was established in 2011 as a project of the governments of Denmark, Spain, France and Norway, represented by their development agencies, and the African Development Bank.

The facility is a partnership with the Uganda Development Bank which will also manage it including identifying and advising the beneficiaries as well as disbursing it.

The facility mainly targets youth, women and green enterprises and, according to Sylver Kyeyune, the UDB Director Risk, these segments of the business community find it hard to access credit on the open market due to the requirements, mainly collateral.

He says this is why the Bank will guarantee up to 50 per cent of the loan amount, while green and women enterprises will have their loans covered up to 75 per cent by UDB.

UDB emphasises that it will continue focusing on its priority areas when supporting the private sector, in agriculture, human capital development, ICT and innovation, industry and tourism. The loans will be given out within UDB’s interest structure of between 10 and 12 per cent.

UDB Chief Executive Officer Patricia Ojangole says that this is part of the Special Programs they launched in 2022 mainly targeting women, youth and SMEs, after realizing that these categories could no ably access credit on the open market. She says that since then, they have reached out to 250 entrepreneurs, but adds that the number would have been even bigger if they had got partners before.

The two recognize the importance of the target sectors to the contribution of the economies in Africa and Uganda in particular, but also that they have special challenges.

“They make tangible contributions to solving the country’s most complex and intractable challenges like unemployment and expansion of the tax base. However, access to affordable financing remains one of their major challenges,” Ojangole said.

Under the partnership signed Wednesday between the two organisations, the funds will only be managed by UDB dealing directly with the beneficiaries to make it as affordable as possible to the SMEs. AGF Group CEO Jules Ngankam hailed UDB as a key player in promoting private sector development.

“By supporting UDB to accelerate SME financing, we envision several development impact indicators, including increasing the number of people employed/engaged in businesses directly or indirectly and growth of enterprises from one stage to another: e.g., from Small to Medium enterprises, through financing and impact of capacity development on their operations and governance,” he said.

He said since the lockdowns started at the onset of 2020, it was only last year that there was a real visible recovery by SMEs, hence the need to be helped, adding that they hope to launch more products later.

Under the arrangement, AGF will also provide tailored facilities, specifically the green guarantee for SMEs investing in low carbon and climate resilient businesses; and the African Development Bank’s Affirmative Finance Action for Women in Africa (AFAWA) Guarantee for Growth program to support women-led and owned businesses.

To accompany the guarantee partnership, AGF is at an advanced stage in structuring a Capacity Development support that will enhance UDB’s capacity to foster financial inclusion for the youth, women, and green SME projects.