Microfinance banks would foster access to credit for SMEs

Microfinance banks would foster access to credit for SMEs

The above image is the logo that illustrates the ‘Development Bank of Rwanda’

Financial Institutions like Microfinance Banks are seen as vital channel through which   Small and Medium enterprises-(SMEs) mainly in rural areas can access credit to expand their businesses.

Due to their nature of operation, rural SMEs which  are  mostly  household  enterprises  depending  on   meager family  capital have been finding it difficult to   woe banks to extend credit to them with the latter seeing the country’s budding sector  as risky  to lend to.

While on the other hand microfinance Institutions may not have enough line of credit to   lend to the entire sector which as well as enough resources to   ensure   loan recovery as well as supporting the borrower technically to avoid defaulting.

“Their service delivery   is   more improved compered to the microfinance sector and they   are still closer to the people they serve,” Jessica Massi, a microfinance Experts earlier said

Moreover, with their   position as banks, they are able to   access a credit line that would help extend loans to SMEs and the agri- business sector, thus trickling access to finance to rural areas.

For Example,  Urwego  opportunity  bank, that  in the past  years graduated  from  Microfinance Institutions has  negotiated a short time  line of credit to  boost   its  lending  capacity to  farmers  and  household  enterprises.

With   a financial agreement with the Development Bank of Rwanda that has extended a one year loan worth Rwf1 billion, the microfinance Bank is hopeful that it will increase its lending arm  agri business  from the current 40,000 agri business  clientele to  about  80,000.

“Thefacilitywill make it possiblefor us to   double   the numbers we are lendingto in the agri business,” said Emmanuel MawochaTineyi, chief executive officer atUrwego Opportunity Bank

This  according to  Financial experts  will  help  boost   economic  growth  considering the fact that the agriculture  sector is the  country’s largest  sector  by employment base with  over 80 percent of the population  get  income  from there.

“We are confident that this partnership will enable Urwego Bank to  finance SMEs,” Alex Kanyankore,  Chief Executive Officer  at  Development Bank  of Rwanda-BRD  noted adding that   the  most   beneficiary  is the SME  segment that is not served by  banks mainly  BRD.

The bank that   is in plans of expanding further in rural areas is looking at developing products that would suit the   needs of their clientele as rural based SMEs.

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