Government Urges SMEs to Access Shs500 Million Small Business Fund Amidst Low Uptake

The Ugandan government is actively promoting the Small Business Support Fund, a financial facility aimed at bolstering enterprises, which has seen a surprisingly low uptake. Officials are urging small and medium-sized enterprises (SMEs) to leverage this opportunity for affordable capital, essential for expansion and post-pandemic recovery.

Initially established to aid businesses impacted by COVID-19, the fund’s scope has broadened to encompass viable businesses across diverse sectors. The goal is to provide accessible, long-term financing to fuel investment and growth. Sarah Nantongo from the Bank of Uganda highlighted that eligible businesses can secure loans of up to Shs500 million, with repayment periods extending up to four years and a grace period of one year.

The loans come with a competitive interest rate of 10 percent per annum on a reducing balance. This makes the fund an attractive option for businesses needing working capital, acquiring productive assets, or expanding their operations. A wide array of sectors, including tailoring, carpentry, retail, hospitality, schools, pharmaceuticals, construction, and transport, are eligible, provided the businesses demonstrate repayment capacity.

Despite these attractive terms, uptake remains below expectations. Over 4,000 applications have been processed, with approximately 3,900 businesses receiving loans totaling Shs75.56 billion. The government has contributed half of this amount, Shs37.78 billion. To address the low utilization, government is emphasizing increased awareness and easier access to information about the fund’s requirements.

Challenges such as limited awareness and difficulties in meeting documentation and credit assessment requirements are cited as barriers. Nantongo stressed the importance of maintaining proper financial records to improve a business’s eligibility for loans. Furthermore, businesses without traditional collateral may still qualify by offering alternative security, such as movable assets, subject to the lending institution’s policies.

The government is encouraging business associations and financial institutions to actively participate in promoting the fund, ensuring that more eligible enterprises can benefit from this vital financial resource. This initiative underscores the government’s commitment to supporting private sector development through increased access to affordable finance.

Source: Nile Post