Financing SMEs improves economy

Tuesday August 20 2019

Ms Mariam Nanziri, the founder of a natural

Ms Mariam Nanziri, the founder of a natural oils company producing avocado oil, displays her products. Small businesses such as these need incentives from banks to expand their operations. PHOTO BY ERONIE KAMUKAMA 

By Ronald Kasasa

Small and Medium Scale Enterprises are considered among the driving forces in economic development. They stimulate private ownership and entrepreneurship skill, they are feasible and can adapt quickly to changing market, demand and supply situations, generate employment, help drive diversity in economic activities and make significant contribution to export and trade.

Despite improving the social econonomic well-being of Ugandans, it is not a smooth ride when it comes to running SMEs in Uganda.

Many entrepreneurs face limitations (financial problems, poor managerial skills, socio-cultural setbacks, inadequate basic infrastructure, economic problems, unstable policy environment, taxation, competition, location) in running these business and they might not be in a position to enable the SMEs to play an effective role in the development of the economy.

Hurdles
The major hurdle to the smooth running of SMEs world over is access to finance. Close to 85% of SMEs are unsuccessful because of poor financing. This is partly because of factors inhibiting funds accessibility as a result of the stringent conditions set by financial institutions.

Despite the various difficulties SMEs face, they have significantly contributed to the development of Uganda and an increase in financing them can lead to the transformation of these traditional industries which in turn will lead to a vibrant modern sector.

Apart from SMEs providing a solution to the country’s unemployment rates, they also reduce underemployment and income inequalities, utilise local raw materials output expansion and transform the indigenous technology.

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So in order for us to achieve continued economic growth and sustainability, we need to ensure that we provide all the necessary incentives to expand these enterprises but most importantly, we need to ease access to funds for SMEs. For the last 55 years, dfcu has worked with thousands of SMEs and has been part of their journey of transformation and growth and in so doing has contributed to the social economic wellbeing of Ugandans.

The writer is the head of business banking at dfcu bank.

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