TO KNOW THE UNDERPRIVILEGED, WALK IN THEIR SHOES

Last week Bank of Uganda called commercial banks in for a workshop about Small Business Recovery Fund (SBRF) set up last year to help small businessmen get over the worst of the pandemic.

The way the initiative was designed was that the monies would be channeled through commercial banks with government matching shilling for shilling whatever the commercial banks lent out.

Government committed sh100b to the process and the commercial banks matched it for the grand total of sh200b. I remember thinking the Fund was not big enough when it was first announced, but was disabused of that notion last week, sort of.

During the workshop It was reported that of the sh200b on offer only sh690m had been disbursed since November. Another sh1.2b worth of loans was still being assessed.

The monies were targeted at small businesses that do not have more than sh100m annual turnover.

The banks reported that most businesses that applied for the funds were in the sh100m to sh500m turnover and automatically ineligible.

Also the bankers also pointed out that ordinarily businesses with such low turnover cannot qualify for sh100m unless they were being set up for default.

"The central bank, which also takes back in vetting applicants complained that often times the documentation – there is a 26 point checklist which includes board resolutions, audited financial statements and marriage certificates, were often incomplete disqualifying applicants....

I suspect this is another classic case of government projects, backed by good intentions but totally oblivious to the reality on the ground.

For instance what does a sh100m a year business look like?

The other day there was a news report, which made reference to a rolex maker whose operation makes up to 382 chapatis a day.  At a thousand shillings each, that is just under a hundred million a year in turnover, assuming he works five days a week and 52 weeks a year.

Such a guy has no board resolutions leave alone being incorporated, it would be a miracle if he had audited accounts and a marriage certificate may be a stretch.

What this points to is that commercial banks, as they are constituted in Uganda, may not be the vehicle through which to channel these funds.

Government may find that the current model will be suited for those small business above sh100m in annual turnover, while the smaller businesses can work through their SACCOs or Village Savings Associations.

These know how to assess their members risk and provide for it, maybe the central bank will have better luck vetting SACCOs and let them get on with lending the funds to their members. Even if they don’t get many SACCOs it wouldn’t be as bad a success rate as a loan a month that they are showing now.

We need too, to guard against throwing good money after bad.

I have always believed that the main challenge of our business community is inadequate business skills, to allow them not only to thrive in good times but survive through the bad times.

"ABSA bank, at the end of February graduated some 60 decision makers from 46 SMEs who had gone through a yearlong Business survival and continuity training, aimed at equipping them to make sound strategic decisions....

The training was triggered by the challenges businessmen; especially SMEs were struggling with over the last two years due to the Covid-19 pandemic. Participants from the construction, manufacturing, tourism and hospitality sectors.

Among the things they learnt was running business online, building financial management systems and business planning, modelling and management among other relevant subjects. The graduating firms after vetting will have a chance to receive grant financing from GIZ one of ABSA’s partners in delivering the training.

The rationale is sound, enable the potential recipients with business skills so that they can maximize the benefits from future funding.

“To move Uganda and Africa forward, we are going to need collaborative efforts across the board to bridge the skills gap that is holding our SME sector back,” Mumba Kalifungwa, Absa Bank Uganda’s Managing Director (extreme left) said at the event.

The best of intentions can be derailed by an inadequate understanding of the challenge. Planners in both public and private sector need to walk in the shoes of the intended beneficiaries to understand their needs and provide the relevant solutions.

The need to do the right thing has never been more urgent. The SME sector accounts for more than 80 percent of the jobs in the economy. However, some estimates suggest over four million of the 13 million employed in this sector have in the last two years a suffered a decline in their incomes or lost them altogether.

They say the road to hell is paved with good intentions, but that need not be.