Softer rules for SMEs to list at stock market

Profitable Small and Medium Enterprises (SMEs) will no longer face stringent capital measures to access cheap finance from investors at the Uganda Securities Exchange (USE) -the national stock market.

Kampala
Profitable Small and Medium Enterprises (SMEs) will no longer face stringent capital measures to access cheap finance from investors at the Uganda Securities Exchange (USE) -the national stock market. This follows the loosening up of conditions required by the USE for an SME to be listed on the bourse, by selling their shares to the public.

SMEs wishing to access finance at the Exchange, are now required to have only Shs200 million paid-up capital instead of Shs1 to 2 billion, assets worth Shs400 million, a minimum of 100 shareholders instead of a thousand after the initial public offering (IPO), and at least two years of audited financial statements as opposed to five.

And before the IPO, the issuing company must have net assets valued at a minimum of Shs400 million.
Simon Rutega the, chief executive officer, USE, last week, said the changes were made to give Ugandan SMEs access to cheaper finance from larger investors like corporate companies, pension funds and retirement benefit schemes investing at the exchange.

Largest sector
In Uganda, SMEs contribute between 75 and 80 per cent of the country’s Gross Domestic Product (GDP) but are limited to expand because they lack access to affordable capital.

Most entrepreneurs finance their businesses using their savings, commercial bank and microfinance loans with interest rates ranging between 16 and 40 per cent.
The high interest rates are charged on loans taken by SMEs because they are perceived to be risky and less likely to pay back the credit.

“If you have been borrowing from a commercial bank, it will mean you reduce the cost of finance,” Mr Rutega said at a workshop in Kampala convened to sensitise managers and owners of SMEs about the benefits of listing on the Alternative Investment Market Segment (AIMS), at the Exchange. The AIMS is the section of the stock market, which is used by small and medium size high growth companies to raise capital for further investment.

Limited Finance
Access to finance is cited as the most problematic factor of doing business in Uganda, according to the World Economic Forum and Global Competitiveness Report- 2007-2008.
Prof Ephraim Kamuntu, the State Minister for Planning in the Ministry of Finance, lauded the USE for loosening up its rules for SMEs to list.