Credit to the private sector has remained stagnant at 11.6 Trillion shilling over the past 4 months, further highlighting the business environment within the economy that is clearly subdued.
The Bankers Association admit that its members are having difficulty in endorsing most applications for credit by business owners, in real fear of default as Non Performing Loans remain high at nearly 6%.
A cross section of lenders are now shutting down some of their branch operations in otherwise major municipalities such as Mbarara, Gulu and Mukono; advising their clients to consider online products to undertake transactions.
After Kenya Commercial Bank (KCB), dfcu and Stanbic Bank and other banks released their financial results for the first half of 2017 last week, it became obvious that the money people are operating in a narrow economic environment.
Despite recording profits, all reported a decline in deposits and fall in numbers of people applying for loans.
For some like KCB, there is a belief that this has partly resulted from the difficulty in accessing finances and it has now embarked on a countrywide training of potential clients.
KCB Uganda, in partnership with the European Investment Bank (EIB), has kick-started its financial training forum amongst local SMEs in Kampala.
The training is aimed at helping SMEs understand key aspects of accessing finance from financial institutions, including how to get a loan, how to package their loans application, and how well they can manage the funds to avoid defaulting.
Speaking during the training session at Hotel Africana, Joram Kiarie the KCB Managing Director, noted that this will hopefully bridge the gap between the bank and the SMEs.
“We have noticed first-hand the difficulties SMEs face while applying for loans,” noted Kiarie. “Majority of our clients, especially first time borrowers, do not know how to package their applications.”
“We are here to train our SMEs so that they can have the requisite information and knowledge to enable them access quick and affordable financing.”
Earlier this year, the EIB, extended a 10 million euros (Shs 38 billion) loan facility to KCB for on-lending to SMEs.
The credit facility ensures that SMEs now have access to long-term financing ranging from 5-7 years to fund expansion of their, sometimes, struggling business.
Brian Myesigye the CEO of Bravo Shoes, noted that one of the key challenges faced by SMEs is lack of books of account.
“Most of our businesses are informal, we are trying to formalise them to ensure effective credit analysis,” he said.
According to the bank, the EIB credit facility will benefit more than 380 SMEs across the country with an average loan of Shs 100 million per business.
So far, the bank has trained SMEs in Jinja, Mbale, Lira, Gulu, Arua, Hoima, Fort Portal and Mbarara.