Small and Medium Enterprises (SMEs) can access longer-term financing through capital markets even if they do not qualify to the listed on the stock Exchange, financial experts have said.
Speaking on Tuesday during the launch of the findings of a study titled: 'Leveraging Capital Markets for SME Financing in Rwanda,' the executive director of the Capital Markets Authority, Robert Mathu, said that SME's need not list on the Rwanda Stock Exchange in order to access longer-term funds. "There are other avenues such is issuing of bonds," he said.
The study, a joint effort of the African Development Bank (ADB), the Government of Rwanda and the Capital Markets Authority, is a contribution to measures aimed at improving access to finance by small enterprises.
Small and medium Enterprises are generally considered the "pulse" of Rwanda's economic activities because they employ the largest portion of the country's workforce.
While several initiatives have been put in place to support SME's in their search for longer-term funding, there are still some challenges mainly related to the nature of the businesses.
The biggest challenge is that commercial banks continue to shun SMEs because most of them have no business plans, don't proper books of accounts and have no cash flow projections among others issues. As a result, banks find it hard to lend to business whose entire existence may be dependent on an individual.
The ADB resident representative for Rwanda, Negatu Makonnen, said that the study is aimed at "complementing the bank's lending operations by sharing lessons of experience from other countries where capital markets and related financial instruments have been used to finance SMEs."
Success stories have been cited from Ghana, Korea, South Africa and Brazil.