Kampala, Uganda | THE INDEPENDENT | The UN and Stanbic Bank have launched an initiative in which they hope to raise up to USD 100 million to help small and informal enterprises out of the effects of the COVID-19 pandemic.
The initiative dubbed, the Economic Enterprise Restart Fund is a three-year initiative and is aimed at helping the enterprises that find it hard to access formal financial services especially credit.
While it aims to reach the beneficiaries through village savings and loans association and Savings and Credit Cooperative Societies or SACCOs, special emphasis will be on those involved in agriculture.
The UN Capital Development Fund in Uganda offered 1 million dollars to kick-start the fundraising while Stanbic Bank Uganda has set aside 5 million dollars towards the initiative.
The money will be channeled to the beneficiaries partly as a grant and partly as a soft loan.
It will also be used for training of the beneficiaries on how to adopt management systems that can be recognized by lenders and enable the enterprises access credit.
This will include digitalizing the operations and the dealings between the individual and the group they belong to and as well as between the group and the bank which will in turn create a bridge between the entrepreneur and the bank.
According to the Bank of Uganda, about 11 million Ugandans have bank accounts and can therefore access formal financial services. However, almost half of Ugandans can access a form of financial service from SACCOs and VSLAs.
According to the Ministry of Trade, Industry and Cooperatives, there are more than 21,000 registers SACCOs in the country.
The UN believes that women and youth have been hit more by the pandemic and its effects and since they usually dominate the SACCOs and VLSAs, it is hoped that the fund will have a big and fast impact.
The UN Representative to Uganda Rosa Malango says the pandemic has erased many economic gains the country had made including the journey to attaining the Sustainable Development Goals, adding that the EERF’s objective is to increase job opportunities.
The project initially set to run for 3-years is also planned to be executed in conjunction with government’s rural-based programs like Operation Wealth Creation as well as district cooperative and commercial officers for easy reach to the targeted communities.
The banks will deliver the money to the SACCOs in a way of a loan depending on the amount requested, then the SACCOs which will have evaluated the members will lend to the members who will then be expected to repay the money back to the SACCO.
The training of SACCO managers and the entrepreneurs will be free of charge.
Stanbic Bank Chief Executive Officer, Anne Juuko says banks mainly rely on the assessment of the customer’s ability to pay, unfortunately, the informal entrepreneurs have no financial history of records of their businesses to prove that they are worth lending to.
The Deputy Chief Coordinator of Operation Wealth Creation, Charles Angina says this will go a long way in overcoming the perception by the informal entrepreneurs that commercial banks are not meant for them. He says this perception has seen them lose out on initiatives like the Agriculture Credit Facility or the Agriculture Insurance Scheme.