Friday, August 21, 2009

DBZ launches scheme for small enterprises

DBZ launches scheme for small enterprises
Written by Chiwoyu Sinyangwe
Friday, August 21, 2009 4:54:22 PM

SMALL businesses entrepreneurs in the country should abandon the legacy of believing that the government owes them a favour, commerce minister Felix Mutati said yesterday.

And Development Bank of Zambia (DBZ) has launched a national Credit Guarantee Scheme (CGS) for micro, Small and Medium Enterprises (MSMEs) expected to grow about US$10 million (about K48 billion) during its life.

The Privte Sector Development Reform Programme (PSDRP) made available the initial amount of US $2.1 million (about K9.6 billion) as seed capital.

During a breakfast launch yesterday, Mutati said there was need for small and medium entrepreneurs (SMEs) in the country to respond responsibly to the financing arrangements that were being tailored for the sector with the help of the government.

Mutati also urged the local entrepreneurs to build the spirit of innovativeness and avoid duplicating already successful enterprises.

“We need to abandon the legacy of believing that you are owed a favour by the government when you get the fund from the government...this legacy must be abandoned,” said Mutati. “We need to research on the business you are undertaking and understand the risks associated, don’t do what your neighbour is doing…we also salute excellence in failure where you put in everything but things just fail.”

And DBZ managing director Dr Abraham Mwenda said CGS would guarantee new MSME credit portfolios of eligible participating financial institutions as opposed to the existing ones.

Dr Mwenda said the maximum coverage rate to be provided under CGS would be 60 per cent and only capital or principle losses would be covered, meaning that participating financial institutions would carry some residual credit risk on their MSME lending portfolios.

He said apart from improving access to finance, CGS was expected to make significant contribution to unlocking the potential of the MSME sector as an engine for private sector based investment and production.

Commercial banks in the country are eligible to participate in the CGS and others have so far showed interest in the facility.

“Eligible loans will range from a minimum of K20 million to maximum limit of K300 million to a single enterprise or group of related enterprises,” said Dr Mwenda. “There will also be limits set for participating financial institutions. Allocation will be on a first come first-served-basis based on eligibility criteria to be communicated to participating financial institutions.”

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