Bank of Kigali (BK) and the Business Development Fund (BDF), a government-backed initiative supporting small businesses, solidified their commitment to fostering financial growth for micro and small enterprises (MSEs) through the signing of a partial credit fund agreement on Wednesday, December 27.
According to Diane Karusisi, Chief Executive of BK, the agreement entails BDF providing a partial guarantee, reaching up to 50 percent or more, especially tailored for MSEs. This strategic move aims to facilitate improved access to credit for MSEs at reasonable rates, addressing a key challenge faced by BK’s clients in this sector—limited access to financing due to a lack of collateral.
Karusisi emphasized that the establishment of the partial credit fund signifies a proactive step toward resolving the financial constraints experienced by MSEs, ultimately supporting BK’s ambitions to foster the growth of businesses within this segment.
Vincent Munyeshyaka, Chief Executive of BDF, outlined the specifics of the partial credit fund, noting that it will cover 50 to 75 percent of loans extended by the bank. This coverage rate, provided by BDF, is designed to bolster the development of small and medium-sized enterprises (SMEs).
Munyeshyaka highlighted the immediacy of the initiative, citing a budget of approximately Rwf30 billion allocated for individual guarantees. The chief executive expressed a desire to sustain this quick-win action plan, emphasizing its potential positive impact on SMEs.
Looking toward the long term, starting January 2024, BDF plans to enlist the expertise of a technical adviser from the World Bank. The adviser’s role will be instrumental in designing a portfolio guarantee, shifting the focus from individual customers to agreements with banks. Munyeshyaka explained that this approach aims to streamline risk assessment processes for BDF.
In return for offering this service, BDF will receive a credit guarantee commission fee ranging between 1 to 2 percent of the amount covered by BDF for individual customers. This fee structure aligns with the sustainable financial model envisioned by the collaborative efforts of BK and BDF.
The enduring partnership between BK and BDF, established over an extended period, underscores their shared commitment to fortifying relationships and furthering their impact in developing businesses through the facilitation of affordable loans.
