Small businesses can now easily access Covid recovery fund loans - BoU

Business beneficiaries are required to have a turnover of Shs10 million and total assets of Shs100 million.
They are required to have between five and 49 persons in their employment.
The money borrowed from the Fund is not available to pay existing loans that the business may have.
The maximum limit for borrowing is Shs100 million.

Bank of Uganda says few small business owners have registered for the Small Business Recovery Fund despite the acute lack of capital among small and medium-sized enterprises.

The information was relayed by the Bank of Uganda deputy governor Michael Atingi-Ego while addressing a meeting of financial institutions about the performance of the Agricultural Credit Facility and the Small Business Recovery Fund in Kampala.

He said that micro, small, and medium-sized enterprises (MSMEs) continue to struggle with accessing affordable financing despite making up 90 percent of the private sector activity, employing over three million Ugandans, and contributing over 70 percent of the Gross Domestic Product.

Small Business Recovery Fund

This situation was only worsened by the Covid-19 pandemic. The government then created a stream of capital for business recovery by accessing concessional loans under the Small Business Recovery Fund in July 2021.

However, the Fund came with stringent operational guidelines that partially discouraged uptake. This has resulted in only Shs6.58 billion disbursed by December 31, 2022, a figure less than the expected performance.

How the Fund worked was that government would remit Shs100 billion to the Bank of Uganda to capitalise and match by at least eight financial institutions, which would boost the money to Shs200 billion available for lending.

Operation guidelines

Business beneficiaries are required to have a turnover of Shs10 million and total assets of Shs100 million.
They are required to have between five and 49 persons in their employment.
The money borrowed from the Fund is not available to pay existing loans that the business may have.
The maximum limit for borrowing is Shs100 million.

Atingi-Ego noted that these requirements could be restrictive and have shunned small businesses from accessing finances against the backdrop of Covid-19 shocks to the economy.

Amendments

Some requirements have been adjusted, for example, the Fund provides for two employees instead of five. Beneficiary businesses have also been allowed to use part of the borrowed money to pay off existing loans.