UGANDA, Kampala | Real Muloodi News | Government is now all set to release a 200 Billion Shillings relief fund to help small businesses recover from the effects of COVID-19. The government made the announcement of the fund back in June as it locked down many sectors because of the second wave of the COVID-19 pandemic.
The government intended this fund for the category of small businesses because small traders have missed out on previous relief funds, which were mostly disbursed to micro, medium, and large businesses.
Medium and large businesses can access relief funds through the Uganda Development Bank and Microfinance Support Centre. While micro businesses have an opportunity to benefit from funding that flow through Saccos and Village Savings groups.
The government partnered with commercial banks and microfinance deposit-taking institutions all over the country to manage the fund. Under the partnership, the government contributed 100 billion to kick start the fund, while they expect participating institutions to provide the remaining 100 billion.
The Minister of Finance, Planning and Economic Development, Matia Kasaija says eligible businesses will include all small businesses operated by individuals, groups, partnerships, and companies employing 5-49 people, and with an annual turnover of 10 million to 100 million shillings.
Participating financial institutions will only charge interest of up to 10%, on a declining balance basis, and this shall be limited to funds contributed by banks and not the government’s contribution.
Kasaija said lending institutions must not charge facilitation fees exceeding 0.5% of the sum borrowed. He also emphasised that every borrower had only one chance to borrow from this relief fund, and those who had benefited from previous funds were not eligible.
When asked why the lending banks have been allowed to charge interest and ask for collateral, even though the fund is a relief for business, the Uganda Bankers Association chairman Mathias Katamba said they had to be cautious because the money must be returned. And that it would help borrowers move towards formalisation of their businesses, something that has greatly affected their ability to access formal finance and other benefits.
The Bank of Uganda will supervise the funds.
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