SMEs are vital contributors to the economies of virtually every country across the globe. However, the COVID-19 pandemic inflicted great commercial hardship on most of these businesses. The situation is worse in Africa. According to the Uganda Business Impact Survey 2020, 85 percent of SMEs in Uganda will be adversely affected by the ripple effects of the lockdown measures earlier this year.
SMEs in Uganda were understandably frustrated by the global crisis this year. They have been away from their businesses for months, are still struggling to get back on their feet. A great way to do this is by taking advantage of business loans in Uganda. If you’re a business owner, the following are some of the best places for you to start:
This fund was set up back in May this year and is geared towards helping SMEs in Uganda resolve their financial problems post pandemic. By approving the sum of UGX 830,000,000 (approx. €200,000) initial capital for this fund, The Support to Agricultural Revitalization and Transformation (START) Facility Management Board put in place a means of reviving SMEs in Uganda currently struggling from COVID-19 related challenges.
The plan here is to accelerate their capacity to access the working capital they need from Uganda Development Bank (UDB). It will also provide access to other financing institutions at zero-interest-rate and with a flexible repayment plan. By providing these reimbursable grants to these businesses, the START provides the necessary emergency response to SMEs in Uganda. The result would be the continuity and sustainability of these during and beyond the COVID-19 crisis.
2. Mango Fund
The Mango fund for small businesses is one of the best loans in Uganda. Before the pandemic struck, this non-profit impact investment fund promoted economic development. This was achieved by providing both financing and business consulting services to growth-oriented SMEs.
Mango Fund will provide your SME with the financial aid it needs in the form of investments, loans or equities ranging from 13 to 130 million Ugandan shillings. The condition for this grant though is that your business ought to either:
a. Engage in value addition activities, especially in agro-processing, manufacturing, and technical farming but also in other sectors.
b. Be involved with technology to provide skilled employment, and c. have operated for at least 12 months with positive cash flows.
The Shs256bn Youth Livelihood Fund is one of the loans in Uganda that can really help out struggling SMEs in this period. This fund was established back in 2013 by President Yoweri Museveni. It is managed by the Ministry of Gender, Labour and Social Development under the Youth Livelihood Programme (YLP).
This fund was primarily established to tackle the unemployment challenge in Uganda. While some aren’t even aware of its existence, this fund has rescued SMEs in Uganda time and time again. Funds are provided through Youth Interest Groups of 10-15 people. They come in the form of soft loans with friendly terms, and there’s no interest for repayments made in the first 12 months.
Also, no physical assets or collateral is required. But 5% per annum surcharge is repaid after the initial 12 months. The fund size can range from Shs1m to Shs25m, and you can check here to apply for this.
4. Microfinance Institutions (MFIs)
Uganda, like most other African countries, is home to various microfinance institutions. Some of these institutions have begun to step up for SMEs in Uganda. These institutions provide financial services to indigenous small businesses to help them to increase their working capital and stay afloat in trying times.
For most Microfinance Uganda institutions, and exempting exceptional cases, the loans they give ranges from 2.6 million shillings downwards. Examples of Microfinance institutions in Uganda who have stepped up in this way include; Centenary Bank; Pride Microfinance Uganda; BRAC Uganda; and Uganda Finance Trust to mention but a few. Though depending on the size of the loan being requested, these institutions sometimes require security or third party guarantees just to be safe.
Crowdfunding is not very popular amongst the average African business owners. Still, it is an alternative way you can fund your SMEs in Uganda. This is because it is the practice of funding a venture or project by raising monetary contributions from a large number of people.
Taking advantage of the money pooled by a large number of people for your business needs at this time is necessary as it relieves you of certain financial strains. A platform currently being used by Ugandans for this is Indiegogo. It has raised capital for multiple projects since its establishment. Others include Musana Carts, the solar street vending revolution, Crowdrise, gofundme, and so much more.
The Agriculture Credit Facility (ACF) was set up primarily to provide medium and long term loans to projects engaged in agriculture and agro-processing on more favourable terms than are usually available.
There is no designated minimum loan amount to the final beneficiary (farmer/ agro-processor). The maximum loan amount to a single borrower is up to Shs.2.1billion. However, this can be increased up to Shs.5billion depending on the business needs in question.
The Ugandan Government established the facility in partnership with Commercial Banks and other credit institutions in the country. They are all referred to as Participating Financial institutions (PFIs). This scheme is administered by the Bank of Uganda and provides for up to 3 years of grace for repayment of the loans given. The maximum loan period here ought not to exceed eight years and a minimum of about six months.
7. Women Funds
The Uganda Women Entrepreneurship Programme was set up by the Government back in 2015 to support Ugandan female business owners. This programme was designed with a singular purpose: to improve women’s access to financial services in Uganda. It achieves this by equipping them with skills for enterprise growth, value addition and marketing of their products and services.
As far as business loans go, Ugandan women who apply for aid under this programme are availed interest-free credit to initiate or strengthen their enterprises. Just like the Youth Livelihood Programme earlier discussed, the UWEP is implemented under the Ministry of Gender, Labour and Social Development. It works hard to accelerate the entrepreneurial spirit of Ugandan women by providing all they need for economic development.
There are various other types of business loans in Uganda. In addition to catering to the capital needs of microenterprises, some of the institutions involved also provide other financial services (such as management consulting) for the SMEs who apply for them. Owners of SMEs in Uganda can take advantage of these loans to rise above the effects of the pandemic.