KAMPALA – Uganda continues to be an entrepreneurial country with an increasing number of small and medium business enterprises day by day.
However, the entrepreneurs that set up these enterprises lacked business management skills and capital, and as such, many of them faced a number of problems and collapse in near future.
These are some of the reasons that forced the Federation of Small and Medium-Sized Enterprises of Uganda (FSME), Finn Church Aid (FCA) and the Missing Middle Opportunity Facility (MMOF) to organize a roundtable discussion on the SME-track towards the FfD4.
The Wednesday meeting was focused on unlocking financing for Growth oriented SMEs.
John Walugembe – CEO FSMEs noted that not all the time that lack of finances is the cause of failing businesses but lack of strengthened business capacities.
“Sometimes, availing finances to SMEs you are not helping them. That’s how we advise the government on issues of Emyooga, Parish Development Model and the rest. If a business that has weak capacities, first solve those before you give them money because if you give them money you may magnify the problems.”
Mr. Walugembe says that causes of small businesses failure are multidimensional and diverse including poor management as well as political, economic, social, cultural and environmental factors.
He, however, decried government domestic borrowing which distorts the market and affects the interest rates at which businesses should borrow.
He advised businesses to avoid unnecessary borrowing noting that a business shouldn’t rely on borrowing. “The whole idea of a business should have a market to consume its products. A business should only borrow if there is a clear business case.”
He added, “Don’t borrow too much, first improve your capacities, your efficiency, do more with less, cut the budget. Borrow because you want to expand, not for consumption.”
Just like Walugembe, Nsubuga Charles – Founder and CEO SESACO Limited, believes a lot has to be done other than financing. He wondered that some investments have been in existence for as many as 15 years but collapse barely two years after getting big funds even at very cheap interest.
“I think investors (funders) shouldn’t just run to put in money and think it’s only finances needed but rather go down to the businesses and study what more else do they need to do for these businesses to thrive. Sometimes, even professionalism can be a challenge.”
He noted that as businesses receive finances, they need technology but most importantly, they should be guided on that “because someone might be excited, goes to China, buys technology, on reaching here, it doesn’t work at all.”
He also tipped businesses not to relieve old staff of their duties after getting big funding but rather upgrade them on the new changes.
Officiating at the event, Francis Mwebesa, Minister of Trade, Industry and Cooperatives commended the Federation and partners for organizing this discussion noting that it was timely.
He said that SMEs are the economic backbone of virtually every economy in the world and account for more than 50% of jobs and more than 35% of the Gross Domestic Product (GDP) in many emerging markets.
In Uganda, he revealed that the 1.1 million MSMEs account for more than 75% of the country’s GDP and 90% of its private sector.
He, however, decried that despite all these benefits, SMEs remain significantly under-served by financial institutions.
“High-interest rates, complex requirements and over-reliance on collateral constrains their access to finance. There is a need therefore for a joint effort between the banks, the Central Bank and Government to innovate and enhance the capacity of Uganda’s private sector to explore other alternative ways of financing operations,” said Minister who was represented by Dr Mutamba Joshua – Commissioner, SMEs.
“The Government of Uganda recognizes the challenge of access to finance for SMEs. Therefore, it has piloted several initiatives to unlock financing for SMEs. These include: The Small Business Recovery Fund, the COVID-19 recovery facility at the Uganda Development Bank, the Emyooga programme, the Youth Livelihoods Fund, the Uganda Women Entrepreneurship Programme, the GROW project and the INVITE project, among others. The Government is also encouraging the growth of capital markets to enable SMEs to access equity financing through the Stock Exchange. The Government of Uganda is also working to unlock marketing opportunities for our MSMEs. Through these efforts, we are unlocking markets in the EAC region, the African Continental Free Trade Area Agreement, COMESA region, and African Growth Opportunity Act (AGOA).”
He is optimistic that supporting SMEs will create decent jobs for young people, catalyze innovation and encourage partnerships among value chain actors.
