- According to the World Bank, only a very small proportion of Ugandan businesses and households have access to a bank loan
- Interest rates often range between 22 percent and 25 percent of the total value of the borrowed amount. This causes many mushrooming small and medium enterprises to stall because entrepreneurs shy away from loan products to boost their businesses
- According to the BOU, the commercial lending rate for low-risk customers currently averages at 25 percent, a figure that some small-scale business owners say will lead to the collapse of their small scale businesses
By Ronald Orachwun
Nebbi- Residents of Tangana trading center Erussi Sub County Nebbi district under the Village Loans and Savings Associations VLSA’s have appealed to government to provide a conducive atmosphere to potential businesses minded Ugandans such as provision of interest free soft business loans in order to boost their businesses.
Muhammad Victor, a resident of the area and a member of “Munguleng” VLSA says Tangana trading center is strategically located within the Uganda and the Democratic Republic of Congo border and is a beehive of business activities, able to attract potential business partners from the two countries to invest in the area.
He however says a number of more established lending institutions tend to charge a lot of interest, which scares away potential business men and women are already facing financial constraints to individually empower their small-scale businesses.
He says the place could easily develop if residents could have access to interest free financial assistance from the government, citing Paidha town council in Zombo district which has over the years developed by commanding a convincing business language.
David Orwiny, the chairperson of Munguleng VLSA and resident of the same area who lost his general merchandise business to thugs two years ago says he has failed to raise enough money to restart his business.
“Besides the high interest rates charged, a number of financial institutions also demand a huge collateral security for their loans for first time borrowers. I am incapacitated to avail these institutions with all their demands.”
He appeals to government to avail the business community in Tangana trading center with interest free financial assistances in order to revive ailing business venters in the area.
According to the latest Twaweza East Africa report, 53 per cent of Ugandans in 2017 said they would boost their businesses while 44 per cent of citizens in 2018 said they would start or boost an existing business if they hypothetical received Shs 350,000 from the government, with an aim of promoting self-reliance.
Despite efforts by Bank of Uganda (BOU) to lower the central bank rate to 11 percent in April 2017, financing remains out of reach for most small to medium enterprises.
Oyungrwoth Jimmy Operi, the Nebbi district secretary for finance says a number of people are scared away by the huge demands from financial institutions, making them miss out the opportunity of expanding their businesses.
“Our people want to expand their businesses but the huge demands and high interest rates are scaring our business community to expand. But you can also enroll for the UWEP, CDD and OWC for you to get money to expand or invest into new business enterprises,” he said.