A woman sells her merchandise in a women business market at Uganda National Museum in Kampala recently. PHOTO BY ERONIE KAMUKAMA Small businesses account for more than 75 per cent of the economy. Banks can offer them capital to finance their operations, Irene Nabwire writes.
Small Medium Enterprises (SMEs) in Uganda are one of the biggest employers in the job market with an annual turnover of up to of Shs360m, employing between 5 and 100 people according to the Uganda Investment Authority. SMEs in Uganda make up for over 75 per cent of the economy while contributing above 20 per cent of the GDP. They are largely engaged in education, wholesale and retail trade, manufacturing, health, social work, furniture, agriculture, hospitality and entertainment, finance and insurance, professional services, as well as Information and Communication Technology (ICT).
For continued growth and profitability, SME owners have incessantly been encouraged to ensure good corporate governance in running their businesses as well as establish structures that can support all business processes. Despite all these in place, access to affordable credit remains one of the biggest hindrances for SMEs survival. It is, however, interesting to note that over 80 per cent of the owners of these SMEs use their own funds to finance their operations – a practice that is not sustainable. The good news is: They can turn to financial institutions.
A healthily financed SME is more likely to grow in production and revenue as opposed to one struggling to meet its most basic operational financial needs. Many SMEs struggle to raise capital to develop, rendering it difficult to grow from the subsistence level to the industrialisation category. Commercial banks have offered support to budding entrepreneurs who have been organised through their SMEs and seek financial and advisory services from banks.
Commercial banks, such as dfcu, have been instrumental in the development of SMEs in Uganda mainly through the provision of short-term loans for yearly finance operations, mid-term for purchase of inexpensive equipment with a short lifespan and long-term credit lines for the acquisition of industrial equipment, land or building.
It therefore goes without saying that commercial banks play a critical role in adding wealth into the economy and ensuring sustainable growth through SMEs.
WHAT IS A SHORT TERM LOAN?
A loan scheduled to be repaid in less than a year. When your business doesn’t qualify for a […]