The government recently established the Economic Recovery Fund worth over Rwf100 billion to support the recovery of businesses hardest hit by Covid-19 so they can resume operations and safeguard employment, thereby cushioning the economy from the effects of the pandemic.
However, accessing this fund managed by the Central Bank comes after meeting the set conditions. For example, for hotel refinancing available to existing hotel borrowers pre-Covid-19, the basis for the refinancing will be existing hotel loan balances as at May 31.
To access working capital as well as lines of credit for expenses such as repairs and restoration of premises or equipment after the lockdown, investment in technology solutions to enhance productivity and efficiency to address lessons learned from the lockdown such as creating online distribution channels, businesses must demonstrate the negative impact of Covid-19 on their operations proven by at least 50 per cent year-on-year reduction in turnover.
For micro-businesses, the borrower should be a legally registered business — company, cooperative or sole proprietor — and must demonstrate the impact of Covid-19 on their operations.
Funds will also be available to micro-finance institutions.
Despite the best efforts by the government to communicate, most members of the private sector appear to lack detailed information about how the fund will work and the mandatory requirements: Income statements for the year 2019 and 2020, proof of social security contribution, RRA clearance, among others.
As such, many are now at the mercy of shrewd bankers to provide guidance.
The government needs to do more to provide information and clarity on how the fund will work to ensure that the businesses who urgently need this bailout, access it without being exploited by middlemen.
This is because some loan officers tend to seek kickbacks from clients to get their loans approved.
The central bank should strengthen supervision and due diligence to ensure that the funds are disbursed fairly.
There are fears among business owners that they may not qualify for funding due to the stringent measures seeing as some businesses were already struggling before the pandemic.
Moreover, banks are expected to be more prudent in lending in the coming months as they anticipate bad loans, this calls for flexibility by treating each business case separately.
Perhaps more importantly, more transparency around the fund management will help in the equitable distribution of the resources. It should be enforced monthly, for example, insisting that banks publish disaggregated data on the loans disbursed so far.
Ultimately, it will take more than just financing; holistic approach is needed that boosts consumer spending to support the full recovery of the economy.
At the moment, most Rwandans are worried about tomorrow. Many do not know if they will still have a source of livelihood; as a result, they are reluctant (rightly so) to spend.
Restoring growth after the pandemic will require a thorough thoughtful public policy.