Government of Rwanda sets reforms to boost SMEs

Various SMEs to benefit from new government reforms

Various SMEs to benefit from new government reforms

The government of Rwanda in 2013 began making progress towards better serving and supporting Small Medium Enterprises (SMEs) sector that constitutes 98 percent of businesses in the country.

The moves is aimed at revitalizing and creating more sources of financial flows for small-and-medium enterprises, the government is now looking to create a partnership with private equity firms.

The government has set new plans for SMEs this 2014 to ease access to finance and loans in a bid to the SMEs’ sector performance and increase their business opportunities.

This comes at a time when government last year undertook the initiative of making reforms in the SME’s sector. Apparently the subject of SME’s access to finance resurfaced during the 11th National Dialogue in December 2013.

President Paul Kagame, who chaired the debate and discourse at the time, said that the institutions responsible for supporting SME’s should be in position to ease the access of finance and reach out to the beneficiaries through information.

During the dialogue, it was also agreed that SME’s have to be a focal point in promoting domestic productivity and act as a base for increasing the tax base- of which the country largely bases on to finance it development projects.

According to Livingstone Nkusi, a senior development officer in charge of SME’s at the Rwanda Development Board, the sector has undergone reforms and there are follow up plans to link SMEs with financial institutions and offer incentives that will quicken the process of accessing loans

Nkusi says that one way to facilitate SME’s this year, will be through reducing the time it takes one to register a business to a few hours, and diversifying the sources of funds from equity firms.

The 2010 SME’s policy paper (Policy objective 3) sights the need that put in place mechanisms for SMEs to access appropriate business financing. It also indicates that lack of access to finance is frequently cited as one of the biggest challenges for SMEs.

The policy recommends working with private commercial banks to strengthen their SME lending windows and knowledge of SME’s in general.

Currently, there are four credit lines and four guarantee funds created by the government for which SMEs are eligible. These include funds for export promotion, agricultural development and SME development.

The SME industry is the biggest employer, and comprises 98 per cent of the total businesses in the country. The sector has 100,000 SMEs but only 25,000 are registered.

“If small businesses can be supported to grow, it will help expand the country’s tax base and revenue,” Ben Kagarama, the Rwanda Revenue Authority Commissioner General added.

Kagarama and Connie Bwiza Sekamana — parliamentary Economic and Trade Standing Commission chairperson — agreed that SMEs in the country could stand to boost economic activity. Sekamana was noted supporting lease loans for SMEs in addition to job creation while Kagarama favored capacity building.

In 2013, government implemented incentives like the flat tax rate, which will ultimately help SMEs stabilize their financial bases.

Attributing statistics from the Private Sector Federation, SMEs account for 41 percent of private sector employment and make up 98 percent of the entire sector.

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