Business Development Centers to Help in Access to Credit

The Business Development Fund (BDF) is planning to open all its Business Development Centers (BDCs) before the end of March, its CEO Innocent Bulindi has told The Rwanda Focus.

17 BDCs are already operational, while the refurbishment of 13 others is in the final stages..

“BDCs play a significant role in offering a lot of business advice to small business operators and working with the local authorities towards the promotion of business development and entrepreneurship,” Bulindi said.

The BDCs will also act as branches of BDF, which has so far been working with business development advisers and entrepreneurship development advisers in the districts, mainly to help entrepreneurs to acquire loans.

He said that BDF’s head office provides financial services to small businesses like credit guarantees for commercial banks, whereas BDCs work with Savings and Credit Cooperatives (SACCOs) at the district level to provide loans to business operators.

“One of the key challenges that small businesses face is the cumbersome loan application process, so we help them in fine-tuning their business plans before they go to the banks.”

Bulindi explained that small business operators who seek for financial support can submit their proposals at BDCs, which help them in appraising their business plans and then BDCs give their recommendations to BDF for approval.

“Access to finance is a broad word, our responsibility as BDF is to address various challenges of small businesses like failing to fulfill the collateral requirements from the banks, because if you want to borrow from a bank, there are certain conditions,” Bulindi said.

He said that there are over 10,000 people who currently using BDCs.

When it comes to getting access to loans, one of the main obstacles for small businesses has always been the condition of collateral which acts as a security for the bank, yet many SMEs do not have any substantial assets. That is where BDF comes in, as it can provide part of the guarantee required to obtain a bank loan.

According to Bulindi, high interest rates constitute another obstacle for small businesses, and here too BDF gives grants to pay a portion of their loans in the form of an investment.

Investing in agriculture

Before anything else, however, a loan applicant requires a good dossier to convince a bank of his capacity to pay back, and here too BDF and the BDCs offer assistance.

“One of the key challenges that small businesses face is the cumbersome loan application process, so we help them in fine-tuning their business plans before they go to the banks,” Bulindi said.

Another aspect of BDF’s activities is to encourage banks to extend credit to sectors they use to avoid, such as agriculture, which is seen as a high-risk sector since a lot depends on climatic conditions which can be unpredictable. Therefore, BDF has a special program for projects in agriculture where it pays part of the requested loan.

The Fund also provides loans to SACCOs to enable them to give out more loans and to improve their liquidity.

Not free of charge

Bulundi says one of the challenges BDF still faces is that people perceive them as an instrument of the government that provides assistance and money free of charge, yet they are running as an enterprise.

“Even if we offer guarantees to the businesses which apply for loans in banks, we need to look at it in a holistic way by bringing on board the business players, the government, the private sector and banks in order to help businesses to get loans at affordable interest rates,” Bulindi pointed out.

He added that the first thing is to help business operators seeking for financial support to always have viable business plans, as well as sufficient financial knowledge.

“It is imperative for the business operators to always have a viable business proposition and to have an efficient business model to make you succeed in your activities,” Bulindi said.