The State Minister of Finance in charge of Investment and Privatisation, Evelyn Anite has warned that government is working with the Central Bank to punish financial institutions that refuse to lend government monies to Ugandan SMEs.
The minister sounded the warning on Wednesday during an engaging Space on the Shs1 trillion SMEs fund.
The government, in collaboration with a number of financial institutions agreed to administer cheaper credit programmes including Agricultural Credit Facility to SMEs, with an aim of supporting economic growth.
However, during the engagement, participants complained of frustration and rigidity by banks while trying to access these funds.
They also accused the banks of holding onto information about government credit programmes.
Speaking to journalists, Anite said that aside Opportunity Bank and PostBank, the rest of banks have been found to be holding onto government monies, warning that this will not go on unpunished.
"It is very unfortunate. and they are hiding all this information because they want to give their products at more expensive rates. So the punitive measure here is we discussed it with the regulator (Central Bank). What we have to do is we don't give them to participate in government monies," Anite said.
"Because when you want to zero down and you say we only give our money to the government banks, they all cry and say 'we can lend the money, please give us!'. Once we include them in government programme of disbursing government credit facility, then they go and hold it. And they have been doing this even with the Agricultural Credit Facility." she added.
The minister warned that government, has in collaboration with the regulator, started evaluating bank by bank to find out which ones are holding onto government monies so that they do not receive these funds any further.
"We are going to shame them, name them, we will take them off the list. It is simple as that because we cannot tolerate anyone holding this information from the citizens yet the have the money and they have kept it. So, give the money to the one which is actively lending the money to those who are requesting for it."
Meanwhile, some participants decried stringent rules and regulations by banks while trying to access financing, saying this has left them with no option but to run to moneylenders for rescue.
Many said that banks including the government-owned UDB, ask for huge collaterals as a condition to access financing.
To this, Anite said there is need to move away from collateral off the land titles to equity financing to save SMEs from 'opportunistic' moneylenders.
"Because the SMEs often times do not have those huge collaterals but even those who have the collaterals, they tend to lose their land titles, houses due to submitting them to the moneylenders which is not fair because how can you take my land which values Shs100 million just in exchange of loan of Shs10 million and then when I default on the Shs10 million you take my land value of Shs100 million. So it's not fair!" Anite said.
She said they intend to organise a bigger barraza with all the banks and the Central Bank, to see how SMEs can be supported to access adequate financing easily.
In her remarks, the managing director of Uganda Development Ban (UDB), Patricia Ojangole said that despite the complaints by SMEs on the flexibility of access to cheaper financing, the bank has come up with interventions like value chain and cooperative lending to address the challenge.
"We have supported a number of cooperatives especially dairy cooperatives and other farmer cooperatives. So here we do our assessment at the level of cooperatives, like that level where they get effective and where they don't succeed. So the cooperative can have, say, 300 or 1,000 members and then each member will want to buy 3 animals or 5 or something small, we lend money at the cooperative level and then you manage and keep that distributed depending upon the needs of your member." she highlighted.
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The chairperson of Uganda Investment Authority (UIA) Morrison Rwakakamba said that unlike foreign investors who have flexibility to find cheaper capital outstide Uganda, local investors still struggle to access loans at friendly interests.
He added that UIA is supporting SMEs by giving them free land in Namanve as well as helping them to access funding through UDB, all aimed at strengthening local investment.
"We said, let's also work with SMEs because we believe that small businesses are the future, big businesses are the future unicorns (global big businesses), so I reached out to my friends John Walugembe, the head of SMEs, negotiated a memorandum of understanding and that's partly why you see him here and his team." Rwakakamba said.
