The Ministry of Finance, Bank of Uganda and commercial banks will meet over low uptake and other challenges affecting the Small Business Recovery Fund.
The government through the Finance Ministry decided to support small businesses with funding through the Small Business Recovery Fund (SBRF).
The announcement came on November 16, 2021, and was part of the government’s measures to help entrepreneurs recover from the financial distress caused by the COVID-19 pandemic.
The Ministry disbursed the SBRF through Participating Financial Institutions (PFI) such as commercial banks, microfinance deposit-taking institutions, and credit institutions.
The government contributed UGX 100 billion and the participating financial institutions also contributed UGX 100 billion to merge the fund managed by Bank of Uganda.
Under the fund, it was resolved that the charging interest rate doesn’t exceed 10% per annum on a reducing basis and that one-time facility fees not exceed 0.5% of the total loan.
The borrowing businesses would be given a minimum of six months and a maximum of 4 years to repay the loan, including a one-year grace period depending on the nature of the project.
Moses Kaggwa, Acting Director Economic Affairs at the Finance Ministry, said there has been a low uptake of the funds caused by poor publicity and long processes in accessing the funds, among others.
“The commercial banks have to take the applications for the loans from their customers to the Bank of Uganda. So, that has been the process and we found out the uptake has been very low. We agreed to have a meeting with the stakeholders to see how we can work on the procedures so that people can access the funds,” he said.
John Walugembe, the Executive Director of the Federation for Small and Medium Enterprises, welcomed the meeting saying this will help them iron out some technicalities that have hindered access to the funds.
“We are glad that they are planning a meeting. We want to be part of the meeting. As a federation, we can add on something, we can ably represent our enterprises and see how they can be helped to access this money,” he said.
Walugembe said the caps set by banks are benefiting medium-sized enterprises which are already catered for by the Uganda Development Bank (UDB).
“The money was called Small Business Recovery Fund but there is a missing category that is not being served and these are the targeted groups (small businesses).”