Traders have called upon financial institutions to ease down on the conditions usually set before a person accesses assistance from them.
According to World Bank data, only 14.2% of the private sector in Uganda had access to credit in 2020. This figure is significantly below its Kenyan counterpart whose private sector access to credit stood at 32% in the same period.
Tanzania’s rate stood at 13.2%, South Sudan at 1.9%, while the Democratic Republic of Congo registered 7.5% private sector access to credit.
Small and Medium Enterprises (SMEs) are considered key engines of economic growth in developing countries. In Uganda, SMEs employ about 2.5 million people and make up about 90% of the private sector employment, while contributing to 20% of Gross Domestic Product (GDP).
However, access to finance remains difficult with just less than 40% of SMEs having access to bank loans while about 80% of them are unserved or underserved by financial institutions.
While attending a trader’s forum organised by Stanbic Bank at Protea Hotel on Thursday, Mark Muhimbo, an agriculturalist, said most financial institutions do not want to incur risks especially when financing a farmer.
The forum was organised under the theme, “Coming together to achieve procurement,” and was a platform for traders and contractors in the supply chain to discuss avenues through which better working conditions can be achieved.
He said, “The seasonality of our agricultural businesses dictates that the needs for financial help in the industry have to be streamlined in that direction. Our business is also very risky, but most financial institutions are scared of that and do not want to invest in it.”
Muhimbo also said, “When you compare the time you request for a loan and when it gets released, the lag is considerably high. These are some of the things that make people run to money lenders. Banks need to revisit their systems and readjust on requirements and conditions.”
While representing the Director Procurement at the Bank of Uganda, Lawrence Male, said, “In contract financing, without cheap capital, the traders cannot do much. At the Central bank, we endeavour to lower the Central Bank Rate, as and when it is necessary. However, interest rates in different financial institutions are usually high in addition to having a long list of requirements. There is a lot that can be done to support traders to get financial access easily.”
Paul Muganwa, the Head of Corporate and Investment Banking (CIB) at Stanbic Bank said, “We recognise the important role that traders and suppliers play in this country and we pledge to continue supporting them to attain growth. However, whenever you are seeking financial assistance, it is imperative to treat your bank as a very important stakeholder that requires transparency. We as banks consider trust as one of the most important components and when you present such attributes when seeking financial support, it becomes easier for you.”
