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(DAILY MONITOR UGANDA) SMEs to get low cost interest loans

SMEs to get low cost interest loans
Faridah Kulabako
Kampala

Uganda’s private enterprises are set to benefit from the 30 million Euros (about Shs70 billon) fund from the European Investment Bank (EIB), which would see businesses access low interest loans.

The low interest loan facility seeks to facilitate business expansion, diversification and modernisation of enterprises through financing loans and leasing transactions.

EIB is a development finance institution of western Union that operates in more than 120 countries across the world financing private sector projects as a means of fostering economic development of the Africa Caribbean and Pacific countries.
In Uganda, EIB supports private sector small and medium enterprises through the Private Enterprise Finance Facility (PEFF).

Speaking at the EIB-Private Enterprise Finance Facility workshop in Kampala on Wednesday, the executive director, Uganda Manufactures Association Gideon Badagawa said high bank interest rates were a hindrance to the development and competitiveness of businesses especially the SMEs in the market.

“The cost of capital in Uganda is too high and no small business can thrive and make reasonable returns at such high interest loans,” said Mr Badagawa adding, “...high interest rates means that Uganda will be off the regional market.”
He hailed EIB for bringing in an opportunity that will enable Ugandans get loans at a low interest rate.

“We already have a challenge of poor infrastructure affecting our businesses, a reduction in the interest rates would be the only way to boost our businesses.” he said.

Whereas commercial banks charge between 22 and 23 per cent interest on loans, EIB will charge between 16 and 17 per cent depending on the enterprise’s market risk.

“Uganda’s risk assessment is still low that is why businesses collapse and don’t even payback the loans,” said Mr Badagawa.
Funds will be accessed through the approved financial institutions including DFCU Bank, Bank of Africa, Diamond Trust Bank, Crane Bank and Centenary Bank.

A maximum of 3 million Euros (about Shs7 billion) and a minimum of Euro10,000 [Shs23 million] will be availed to borrowers in local currency to avoid exchange related problems like fluctuations of currencies and interest rate volatility.

However, for those interested in taking loans in foreign currency, it will be available in Euro and US dollar at fixed or floating rates. The funding period is five years for loans and three years for leases and small loans of less than Euro50, 000 with a maximum grace period of two years.

Labels: CREDIT FACILITIES, SMEs, UGANDA

posted by MrK @ 11:08 PM